HomeMy WebLinkAbout2013 Annual Financial ReportCity of Livonia, Michigan
Financial Report
with Supplemental Information
November 30, 2013
City of Livonia, Michigan
Contents
Report Letter
1-2
Management's Discussion and Analysis
3-9
Basic Financial Statements
18
Government -wide Financial Statements:
19-20
Statement of Net Position
10
Statement of Activities
11-12
Fund Financial Statements:
Governmental Funds:
22
Balance Sheet
13
Reconciliation of the Balance Sheet to the Statement
23
of Net Position
14
Statement of Revenue, Expenditures, and Changes in Fund Balances
15
Reconciliation of the Statement of Revenue, Expenditures,
53
and Changes in Fund Balances of Governmental Funds
54-56
to the Statement of Activities
16
Proprietary Funds:
Statement of Net Position
17
Statement of Revenue, Expenses, and Changes in Net Position
18
Statement of Cash Flows
19-20
Fiduciary Funds:
Statement of Fiduciary Net Position
21
Statement of Changes in Fiduciary Net Position - Pension and Other
Employee Benefits Trust Funds
22
Component Units:
Statement of Net Position
23
Statement of Activities
24-25
Notes to Financial Statements
26-52
Required Supplemental Information
53
Budgetary Comparison Schedule - General Fund
54-56
Budgetary Comparison Schedule - Major Special Revenue Funds - Community
Recreation
57
Budgetary Comparison Schedule - Refuse Disposal System
58
Pension System - Schedule of Funding Progress
59
Retiree Health and Disability Benefits Plan - Schedule of Funding Progress
60
Note to Required Supplemental Information
61-62
City of Livonia, Michigan
Contents (Continued)
Other Supplemental Information
Nonmaior Governmental Funds
63
Combining Balance Sheet
64-65
Combining Statement of Revenue, Expenditures, and Changes in Fund
Balances
66-67
Fiduciary Funds:
Combining Statement of Net Position
68-69
Combining Statement of Changes in Fiduciary Net Position
70
Independent Auditor§ Report
To the Honorable Mayor and
Members of the City Council
City of Livonia, Michigan
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business -type
activities, the discretely presented component units, each major fund, and the aggregate remaining fund
information of the City of Livonia, Michigan (the "City'), as of and for the year ended November 30,
2013 and the related notes to the financial statements, which collectively comprise the City of Livonia,
Michigan's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements basetl on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Goremment Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of sgnificant accounting
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business -type activities, the discretely
presented component units, each major fund, and the aggregate remaining fund information of the City
of Livonia, Michigan as of November 30, 2013 and the respective changes in its financial position and cash
flows, where applicable, for the year then ended, in accordance with accounting principles generally
accepted in the Unitetl States of America.
To the Honorable Mayor and
Members of the City Council
City of Livonia, Michigan
Other Matters
Required Supplemental Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis, pension system schedule of funding progress and employer contributions,
postemployment benefit plans schedule of funding progress and employer contributions, and the
budgetary comparison schedules, as identified in the table of contents, be presented to supplement the
basic financial statements. Such information, although not a part of the basic financial statements, is
required by the Governmental Accounting Standards Board, which considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate operational, economic, or
historical context. We have applied certain limited procedures to the required supplemental information
in accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and comparing the
information for consistency with management's responses to our inquiries, the basic financial statements,
and other knowledge we obtained during our audit of the basic financial statements. We do not express
an opinion or provide any assurance on the information because the limited procedures do not provide
us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Livonia, Michigan's basic financial statements. The other supplemental information,
as identified in the table of contents, is presented for the purpose of additional analysis and is not a
required part of the basic financial statements.
The other supplemental information is the responsibility of management and was derived from and
relates directly to the underlying accounting and other records used to prepare the basic financial
statements. Such information has been subjected to the auditing procedures applied in the audit of the
basic financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the basic financial
statements or to the basic financial statements themselves, and other additional procedures in
accordance with auditing standards generally accepted in the United States of America. In our opinion,
the other supplemental information is fairly stated in all material respects in relation to the basic financial
statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated April 3, 2014 on
our consideration of the City's internal control over financial reporting and on our tests of its compliance
with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The
purpose of that report is to describe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing, and not to provide an opinion on the internal control over
financial reporting or on compliance. That report's an integral part of an audit performed in accordance
with Government Auditing Standards in considering the City of Livonia, Michigan's internal control over
financial reporting and compliance.
April 3, 2014
City of Livonia, Michigan
Management's Discussion and Analysis
Overview of the Financial Statements
The City of Livonia, Michigan's (the "City") 2013 annual report consists of four parts: (1)
management's discussion and analysis, (2) basic financial statements, (3) required supplemental
information, and (4) other supplemental information that presents combining statements for
nonmajor governmental funds, propnetary funds, and fiduciary funds. The basic financial
statements include two kinds of statements that present different views of the City. The first
two statements are government -wide financial statements that are intended to provide longer-
term information about the City's overall financial status. The remaining statements are fund
financial statements that focus on individual parts of the City's government, reporting the City's
operations in more detail than the government -wide financial statements.
Government -wide Financial Statements
The government -wide financial statements report information about the City as a whole using
accounting methods similar to those used by private sector companies. The statement of net
position includes all of the City's assets and liabilities. All of the current year's revenue and
expenses are accounted for in the statement of activities regardless of when cash is received or
paid.
The two government -wide statements report the City's net position and how they have
changed. Net position, the difference between the City's assets and liabilities, is one way to
measure the City's financial health or position.
The government -wide financial statements of the City are divided into three categories:
• Government Activities - Most of the City's basic services are included here, such as the
police, fire, public works, parks departments, and general administration. Property taxes,
state -shared revenue, and charges for services provide most of the funding for these
activities.
• Business -type Activities - The City charges fees to customers to cover the costs of certain
services it provides. The City's water and sewer system, golf course operations, and
nonfederal senior housing are treated as business -type activities.
• Component Units -The City includes three other entities in its report, the Plymouth Road
Development Authority, the Economic Development Corporation, and the Livonia
Brownfield Redevelopment Authonty. Although legally separate, these 'component units"
are important because the City is financially accountable for them, including debt, which is
issued on behalf of the authorities by the City.
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
Fund Financial Statements
The fund financial statements provide more detailed information about the City's most
significant funds - not the City as a whole. Funds are accounting tools that the City uses to keep
track of specific sources of funding and spending for particular purposes. Some funds are
required by state law and bond covenants. Other funds are established to control and manage
money for particular purposes.
The City has three kinds of funds:
• Governmental Funds - Most of the City's basic services are included in governmental
funds, which focus on how cash and other financial assets that can be converted to cash, flow
in and out, and the balance left at year end that is available for spending. The governmental
fund statements provide a detailed short-term view that helps you determine if there are
more or fewer financial resources available to spend in the near future to finance the City's
program.
• Proprietary Funds - Services that are intended to be entirely self-supporting by customer
fees are generally reported in proprietary funds. Proprietary fund statements, like
government -wide statements, provide both short- and long-term financial information.
• Fiduciary Funds - The City is responsible for ensuring that the assets in these funds are
used for their intended purposes. We exclude these activities from the government -wide
financial statements because the City cannot use these assets to finance its operations.
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
The City as a Whole
In a condensed format, the table below shows a comparison of the net position as of November
30, 2013 to the prior year.
Net Position (in millions of dollars)
GDserrsnertal ActiHties Business type Activities Total
2813 2012 21113 2012 21113 2012
Assets
Gyred arsl other assets $ 56.5 $ 519 $ 313 $ 29.6 $ 878 $ 815
Capital assets 184.0 1849 73_fi 750 25]6 259.9
Total assets 240.5 2368 1649 104.6 3954 3414
Ui i[ies
Current liadlilies 113 125 49 50 162 175
Longterm liabilities 471 493 59 70 530 563
Total liadlitks 58.4 618 198 120 692 T18
Net Position
Net investment in
capital assets 146.4 1456 669 67.2 2133 2128
Restnded 218 189 16 15 234 20.4
Umestricted 139 195 256 23.9 395 34.4
Total net position 8 182.1 5 175.0 8 94.1 $ 92.6 8 276.2 $ 267.6
City of Livonia - Net Position
The City's assets exceed its liabilities at the end ofthe fiscal year by $276.2 million (net position).
Hmever, a major portion (77 percent) of the City's net position represents its investments in
capital assets (i.e., land, roads, infrastructure, buildings, and equipment) less any related debt
used to acquire or construct these assets. The City uses these physical assets to provide
services to its citizens. These assets are illiquid and not available forfuture spending.
Unrestricted net position of the City's governmental activities increased from $10.5 million at
November 30, 2012 to $13.9 million at the end of this year. The amount represents the part of
net position that can be used to finance day-to-day operations without constraints established by
debt covenants, enabling legislation, or other legal requirements.
Furthermore, the City is able to report positive balances in all three categories of net position,
both for the City as a whole, as well as for its separate governmental and business -type activities.
5
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
The following table shows the changes in net position during the current year and as compared
to the prior year:
Changes in Net Position (in millions of dollars)
6
Governmental Activities
Business -type Activities
Total
21113
21112
21113
21112
21113
21112
Revenue
Program reserve:
Clergev for sewres
$ 179
$ 173
$ 353
$ 348 $
532 $
52.1
Operating grants and
contributions
91
87
-
-
91
87
Capital gan4 aM
contributions
10
99
94
1.1
14
29
General revenue:
Pmpertytaxes
532
544
-
-
532
544
State -shared reveme
81
78
-
-
81
78
Rental income and fees
26
2.5
-
-
26
2.5
Interest
91
93
-
91
91
94
Tar¢kr and miscellaneous
93
92
0.1
91
94
93
Total reveme
923
92.1
358
361
1281
1282
Program Expenses
General gosemment
192
197
-
-
192
197
Publicsafety
358
375
-
-
358
375
PuttlCwores
241
247
-
-
241
247
Comminityandeconemlo
development
12
16
-
-
12
16
Recreation aM mature
123
125
-
-
123
125
Interest on long-term bbl
16
17
-
-
16
17
Water aM sewer
-
-
314
334
314
334
Gen coarse
-
-
18
19
18
19
Horsing
-
-
1.1
10
1.1
10
Total expemes
852
887
343
363
1195
1250
Change in Net Position
71
34
1.5
(02)
86
32
Net Position- Beginning of year
1750
1716
926
928
2676
2644
Net Pmition - End of year
$ 182.1
$ 176.0
$ 94.1
$ 92.6 $
2]6.2 $
267.6
6
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
Governmental Activities
In reviewing governmental activities in the above table, it can be noted that revenue increased
by $200,000 and expenses decreased by $3.5 million. The change in revenue is primarily
attributable to a decrease in property tax revenues resulting from lower property values, which
was offset by increases to state shared revenue, court fines, and ambulance transport charges.
The significant factors impacting expenses were increases to pension costs, offset by reductions
to healthcare expenses and reduced staffing.
Business -type Activities
The City has three business -type activities. These include the water and sewer system, the
operating fund for the Fox Creek Idyl Wyld, and Whispering Willows golf courses, and
nonfederal senior housing at Silver Village and Newburgh Village.
The following table shoes the operating income (loss) before contributions, transfers, and
interest for each of these activities in the current and prior year:
(In thousands of dollars)
Water and Sewer Golf Courses Housing
2013 2012 9113 9112 9113 2012
Operating Revenue $ 31,975 $ 31615 $ 1,710 $ 176E $ 1,355 $ 1,345
Operating Expenses (30,969) (33,022) (1325) (1911) (1.096) (966)
Operating Income (Loss) $ 1,006 $ (1,347) $ (115) $ (177) $ 259 $ 3A
The operating results of the Water and Sewer Fund improved substantially from 2012 to 2013.
The City's wholesale supplier of water, the Detroit Water and Sewerage Department (DWSD),
continued recent trends of substantial increases to the cost of water supplied to the City. In
response, the City revised its methodology in rates charged to customers by adopting a much
larger fixed fee component to its charges to better match the way DWSD charges for the
wholesale cost of water.
Capital Assets and Debt Distribution
At the end of fiscal year 2013, the City has $452.2 million invested, before depreciation, in a
wide range of capital assets, including land, buildings, infrastructure, public safety equipment,
computer equipment, and water and sewer lines.
Debt of $37.6 million related to the construction of the above-mentioned capital assets is
reported as a liability in the governmental activities in the statement of net position.
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
Debt related to the water and sewer system totaling $5.8 million and debt related to housing
activities of $0.9 million is recorded as a liability in the business -type activities in the statement of
net position. This debt represents construction of and improvements to existing water and
sewer lines and senior housing rental facilities.
Significant additions to capital assets during fiscal year 2013 include $6.7 million invested in the
construction of infrastructure and improvements to roads and $2.4 million invested in
equipment and vehicles. Significant disposals of capital assets during fiscal year 2013 included the
disposal ofvehides and equipment with a total cost of $2.2 million.
The City's Funds
The fund financial statements begin on page 13 and provide detailed information on the most
significant governmental funds - not the City as a whole. Funds are created to help manage
money for special purposes, as well as to show accountability for certain activities, such as
special property tax millages. The Citys major governmental funds for 2013 include the General
Fund, Community Recreation Fund, and Refuse Disposal Fund.
The City's governmental funds reported a combined fund balance of $34.4 million. This is an
increase of approximately $4.5 million for the year. The increase was caused primarily by
spending constraint in the General Fund and capital improvement projects which began in 2013
but will not be completed until 2014.
General Fund Budgetary Highlights
Over the course of the year, the City administration and City Council monitor and amend the
budget, primarily to prevent expenditures in excess of budget, as required by the State of
Michigan Budget Act The final amended budget included nearly the same total revenue and
expenditures as the original adopted budget.
Actual General Fund revenue was approximately $444,000 above the final budget. Shortfalls
were experienced as a result of tax appeals ($453,000) and reduced transfers of 911 fees to the
General Fund ($500,000). These shortfalls were offset by better than anticipated revenue for
licenses and permits ($363,000), ambulance transports ($277,000), and court fines ($678,000).
Actual General Fund expenditures were approximately $1.1 million below the final budget.
Nearly all departments held expenditures below the final budget
Current Economic Conditions
The City continues to maintain positive fund balances in each of its funds. However, concerns
arise when considering the revenue and expenses that the City is facing in upcoming years.
City of Livonia, Michigan
Management's Discussion and Analysis (Continued)
The majority of the City's revenue base is constrained by factors outside the City's control.
Property taxes, state -shared revenue, and interest income total 76 percent of the City's total
governmental activities revenue. It appears that the revenue reductions are slowing. Residential
property assessments are projected to increase in fiscal 2014, although business assessments
continue to dedine. State -shared revenue is projected to increase slightly in fiscal 2014 and
2015.
On the expense side, certain expenses continue to rise at a rate in excess of inflation. In
particular, retiree healthcare and pension contributions are experiencing significant increases.
Staff reductions, unpaid furlough days, and increased employee cost-sharing for medical
expenses, among other measures, have been implemented in previous years to reduce expenses
to the level of available revenue. We are committed to living within our means, although the
result may be dirrinished programs and service response capabilities.
Contacting the City's Financial Management
The financial report is designed to provide our citizens, taxpayers, customers, investors, and
creditors with a general overview of the City's finances and to show the City's accountability for
the money it receives. If you have questions about this report or need additional financial
information, contact the director of finance at the City of Livonia, 33000 Civic Center Drive,
Livonia, Michigan 48154.
City of Livonia, Michigan
NN Position
Statement of Net Position
November
30, 2013
66,909,178
Primary Governionent
3521,019
Restricted for:
Governmental
Businesstype
Component
3,994,441
Activities
Activities
Total
Unit
Assets
Cash and invednent
$ 44,994559
$ 14,700,058 $
59,691
$ 488,041
Account rereivable:
-
4:94931
-
Library
Taxes
321501
-
327501
76,031
Customers
-
13,220375
13,220375
-
WoderSmrryensation
18,823
-
18,823
-
Duefmmothergovernnentalunits
3,339896
-
3,339896
-
VEDA
552,984
-
552,984
-
Oroeramountrecerciale
3,111769
904,739
3,722,508
8,305
Special assessment
358457
118227
476,684
10,345
Inventory, prepaid expenditures, ruddeposits
3,830983
1123,413
4,954396
-
Restricted asset (Note ])
-
1550,724
1550,724
-
Capital asset (Note 4):
$ 94,104,695
$216,11Dn,846 $
4,025,837
The Notes to Financial Statements are an
Nondepreciable capital asset
35,116156
5,]4732]
40,8fi3483
474,448
Depreciable trial asset - Net
148.842344
67,862153
216,]0449]
5,671571
Total asset
2404984]2
104,927,016
345,426488
6]28041
LiaGlities
Account payable
3,406,418
401206
3,&11624
61992
Due to other governmental units
2,593617
2,593617
Accrued liabilities and other
2,961
147,414
2,]13,]68
9972
neared revenue (Note 13)
611 fi35
114,375
]26010
-
Bondsanddeposits
-
217,016
217,016
-
Noncurrent liabilities (Note 6)
Du within one year
Payable from restricted asset
-
Ho"
HnoBB
-
Oompensded absences
2,874,910
213,345
3,098255
-
CurrentportionoflongtenndeN
1,886000
460,000
2325,000
475,000
Due in more than one year:
Compensated absences and insurance claim
1985407
W5,bol
e,170,805
-
LmdGlldosureobligation
592,394
-
:92394
-
NetOPEBobligation
2,964203
129,645
3,033,848
-
Bondandcapdalleasespayable
35,,680000
5,470,302
41104302
2150000
Total liabilities
58,426,321
10,822,321
69,248fi42
2,702964
NN Position
Net investment in capital asset
146413,500
66,909,178
213,322678
3521,019
Restricted for:
Cormi overall
3,994,441
-
3,994441
Municipal refuse
2,325,130
-
2,325,130
-
Streef,road,andsol lk
4,594,931
-
4:94931
-
Library
881,188
-
881,188
-
Publcsafetymnnencation
2,983500
-
2,983500
-
Gant
81]86
-
81]86
Street lighting
137,074
-
137,074
-
Cdjud ted forfeitures
1231551
-
1231551
Cormi transit
632,442
-
632,442
-
OrdnancereWirenent
-
1550,724
1550,724
Capital improvements
4,]99011
-
4,]99011
-
Unrestricted
13,938597
25,m4,793
29,583,390
904,818
Total net position
$182,073,151
$ 94,104,695
$216,11Dn,846 $
4,025,837
The Notes to Financial Statements are an
Integral Part of this Statement.
10
City of Livonia, Michigan
Functom/Progrzms
Pnmarygmernment
Gown -mental aclim es:
General government
Public safety
Publicwor
Community aid economic
clawlopment
Recreation aid culture
Interest on longterm cleat
Totalgowmmental
actMbes
Buawss4We aaivibes:
wateraidsewer
Golf course
Housing
Program Rownue
Operating Capital Grants
Charges for Grants aid aid
Expenses Sertices Contributions Contributions
$ 18,194,988 $
3,942,528 $
- $
-
35,808,240
6,894,628
1945,768
-
24,063,6/9
2,158,089
6,239,003
278,386
1217,853
237,909
551,730
11,215
12,284,336
4,628,751
3A,625
690,810
1,656,578
-
-
-
85,217,6/4 17,861891 9,114,127 980,411
31,353,332
31,915,495 - 351,987
1825,032
1]09,556 - -
1138,290
1,623,964
Total businessAWe
ac5H5es
34,316,654 35,309,005 - 351,081
Tofalpnmarygmernment
$119,534,328 $ 83.170,902 $ 9,114,127 $ 1,332,398
Component unit -PRDA
$ 1,191,678 $ - $ - $ -
General revenue:
Property faxes
State-sharetl revenue
Inveshnent income
Unresbictecifees annolher
Miscellaneous
Gain on sale of fxetl assets
Total general revenue
Transfers
Change in Net Position
Net Position - Beginning of fear
Net Position - 6d of year
The Notes to Financial Statements are an
Integral Part of this Statement. 11
Statement of Activities
Year Ended November 30, 2013
Not (Expense) Rownue an Changes in Net Posdion
Pnmary Govemment
Gowmmental Business{ Component
AdivIns AdivIns Tdal Unb
$ (6252,460) $
- $ (6252,460) $ -
(26959,B60)
- (26,959,860) -
(15,386201)
- (15,386201) -
(416,999)
- (416,999) -
(6,587,150)
- (6,587,150) -
(1656,518)
- (1656,518) -
(57,261239) - (57,261239)
- 914,150
914,150 -
- (115,416)
(115,416) -
M,664
486664
- 1344,336 1344,336 -
(51,261239) 1344,336 (55,916,901) -
-
53,169,111
-
53,169,111
699,518
8,141,205
-
8,141,205
-
56,554
56,431
112,991
96
2,643,6B5
-
2,643,6B5
-
336,144
-
336,144
-
-
56028
56028
-
64,356359
112,465
64,467,824
899,676
(36000)
36999
-
-
7,056,120
1,494,893
8,559,923
(292,992)
115,011,931
92,609,892
261,626,923
4,311,839
$182,W3,151 $
94.104.695
$276111.846 $
4,025,8]]
12
City of Livonia, Michigan
Governmental Funds
Balance Sheet
November 30, 2013
Plabililies and Fund Balances
Major glans I Revenue Ford
Dealings
Community
Rause Disl>®I
Non -odor
General Fund
Recreation
System
Fund
TdA
Assets
Due to other Mnd
158,814
Cash andlnv¢Menls
a 187E0y9 a
4729,169
a 3,889,765
a 17,138876 a
36,561998
Real
Deterred revenue (IN de 13)
12x3546
ss,]s3
62,s5
dial
Tares
179,121
21}33
bsj i
60,496
327561
glacial asesnents
Fund Balances
-
-
358,Q57
358,Q57
Workerecwnpznston
18,823
-
-
18,823
Due torn other governmental units
2,fW719
-
-
1ars'sa]
3,35896
WBA
52,98!
52,98!
Other
816561
1532bo
a8y3
419,901
1671835
Due torn other Linda IN de S)
158,814
-
-
-
158,814
Inventory, prepaid erpemes, add dposts
385610
545616
Total assets
$ MiOl,325 $
490.3,612
$ 4,044,50
$ 19,323,397 $
43,175,914
Plabililies and Fund Balances
Dealings
Accounts te}ade
$ 8f3]rr 8
215599 8
1661939 8
1259,103 8
3,496018
Due to other Mnd
158,814
158,814
Accrued and other retain
2,038,071
619W
59,087
2116s8
2,438783
Deterred revenue (IN de 13)
12x3546
ss,]s3
62,s5
dial
2,M.384
Total outies
4,45,394
156J49
11698]9
2,381]r]
3,773,399
Fund Balances
BomPencal mvedwyandirrepod
snob
Pal
-
-
-
Pal
R¢Vded
Streets, r®d, aidsidwallis
40.0090
40.0090
PrlludWed kukAures
12s15s1
12s15s1
Grants
81]86
81]86
Captal imPmvemeds
-
-
4,477222
4,477222
Community recreation
-
3,811
-
3,811
Municipal refile
-
-
2,854,611
2,854,611
Street lighting
13],0]4
13],0]4
868443
868443
Pubic early cornminiaton
2,671098
2,671098
cornmmilyVamit
-
-
-
619,617
619,617
comnined- Cabeacoestelevason
-
-
-
sal
882,641
Assigned
Gdhwrse:aptallinnTosements
-
-
-
V56504
456504
Court bwldnglinnTovemenle
-
-
@]2,934
892994
Dmnigned
11
-
-
-
103]331]
Total Lndndlmces
10,758931
3,811
2,854,611
16,911620
34402,515
Total routines and and
ndlaces
$ Mistral $
4903,612 $
4,044,50 $
19}23,39] $
43,175,914
The Notes to Financial Statements are an
Integral Part of this Statement. 13
City of Livonia, Michigan
Governmental Funds
Reconciliation of the Balance Sheet to the Statement
of Net Position
November 30, 2013
Total Fund Balances of Governmental Funds $
34,402,515
Amounts reported for governmental activities in the statement
of net position are different because:
Capital assets used in governmental activities are not financial
resources and are not reported in the funds
183,958,500
Certain receivables are expected to be collected over several
years, including special assessments, delinquent personal
property taxes, and grants
2,165,749
A portion of fines and fees is not available to pay for current
year expenditures
1,645,937
The liability for compensated absences is recorded when
incurred in the statement of activities
(8,625,593)
Landfill closure and postclosure liability is not due and payable
in the current period and is not reported in the funds
(592,394)
Long-term liabilities are not due and payable in the current
period and are not reported in the funds
(37,545,000)
Net OPEB obligation is not due and payable in the current
period and is not reported in the funds
(2,964,203)
Accrued interest is not due and payable in the current period
and is not reported in the funds
(135,572)
The Internal Service Fund (self-insurance) is included as part of
governmental activities
9,763,212
Net Position of Governmental Activities $
182,073,151
The Notes to Financial Statements are an
Integral Part of this Statement. 14
City of Livonia, Michigan
Governmental Funds
Statement of Revenue, Expenditures, and Changes in Fund Balances
Year Ended November 30, 2013
The Notes to Financial Statements are an
Integral Part of this Statement. 15
Major Special Revenue Fund:
Tad
Community
Rebse oisp®I
IN wall
Gwemmatal
General Fund
Recreation
System
Find
Find
Russell
Property taxes
8 D.]06j96 8
3,606519
8 18913,86! 8
6,,182,768
8 53.12956]
Licenses antl permits
1,!63859
-
-
1,!63859
Federal revenue
225,697
-
1,,1/1,193
I,]1y2298
Slate atlloal revenue
ajosu92
53,1525
6,452,3]]
1,18359,1
Charges brservices
416,372
4182,718
28819
Msas9
9,207,688
Finesand Mkitures
41694,
-
1,142,753
5,Zi9,]2o
Interest
23,],16
42.53
-
20.296
481
Other revenue:
Special assensua
1'81,926
1'81,926
Other nadelanewsincwne
3,1625,1
84,425
185]2
889,161
4,181;112
Total revenue
52,595,423
],]32'32
11
211,65,1873
92,18,883
Expenditures
Current
General gwemrrenl
6,188821
-
-
6,188821
Pubicsakly
31,538336
-
1,18369
34,698,785
such work
2,]3],861
-
11649581
9,647,859
24,04521
Coarrealunity and ecww me
develonent
ta
525,71
-
6719,12
1,2114,659
Recreation and culture
1,,153687
4,615,498
-
4,8]5,821
11,0.04,126
Erni demons, Insurance, and
other
2,1]23]
-
-
2,1]23]
Capital outlay
-
-
-
3,4, 1,822
3,4, 1,822
Oelf service
3,,182264
3,,18228,1
Total drentltures
48492,199
4,615698
11649581
22,714697
81,602575
Excess of Revenue Over(Unden
Expenditures
4,182624
3,06934
(151,3866)
(2,12arl
4,5 ,4128
Other Financing Sources (Ines)
Transkrs In IN do 5)
40,001
-
7,518,832
7,58,832
Transkrs out IN do 5)
(2,616.926)
(2.669951)
-
(2,ZN,95)
(1,596832)
Total other inancing
(uses)sources
(2,606.926)
(2.669951)
Net Fill in Fund Balances
1495,696
3,16983
(491,1866)
3,169,1153
4,497,428
Fund Bakncn-Beenningofyear
9.263233
3,4511,3111
3,3489]1
1,8325,14]
29,965,1187
Fund Baknces-Endai
$ 18,758,931 $
38,1],293
$ 28',4,1 $
16941,Q0
$ 34A82515
The Notes to Financial Statements are an
Integral Part of this Statement. 15
City of Livonia, Michigan
Governmental Funds
Reconciliation of the Statement of Revenue, Expenditures,
and Changes in Fund Balances of Governmental Funds
to the Statement of Activities
Year Ended November 30, 2013
Net Change in Fund Balances - Total Governmental Funds $
4,497,428
Amounts reported for governmental activities in the statement
of activities are different because:
Governmental funds report capital outlays as expenditures;
however, in the statement of activities, these costs are
allocated over their estimated useful lives as depreciation:
Capital outlay
7,584,996
Depreciation expense
(8,329,750)
Loss on disposal of fixed assets
(205,216)
Certain revenue reported in the statement of activities is
recorded in the governmental funds as deferred revenue
280,709
Repayment of bond principal is an expenditure in the
governmental funds, but not in the statement of activities
(where it reduces long-term debt)
1,740,000
Interest expense is recorded when incurred in the statement of
activities
5,705
Net decrease in accumulated employee sick and vacation pay is
recorded when incurred in the statement of activities
490,849
Increase in landfill liability is recorded when incurred in the
statement of activities
(254)
Increase in net OPEB obligation is recorded when incurred in
the statement of activities
(689,436)
Internal service funds are included as part of governmental
activities
1,681,089
Change in Net Position of Governmental Activities $
7,056,120
The Notes to Financial Statements are an
Integral Part of this Statement. 16
City of Livonia, Michigan
Proprietary Funds
Statement of Net Position
November 30, 2013
The Notes to Financial Statements are an
Integral Part of this Statement. 17
Nonmajor
X4jor Enteryise Fund
Enterpise Fund
Taal Enterturse
internal Series
Water anaSewer
Homi
Goffcomse
Fund
Fund
Awards
Current aceta:
Cash and n.atments
s 13.31 s
753513
s 74,847
s 14.7W.058
s B.d32w9
Accounts reconvene:
S9e<al assessments
7,690
-
-
7,690
-
Customers
13,220,375
-
13,220,375
-
Other
55 'sss
-
59,071
606739
-
n.amory,uete;ae.9enawree,
pra
andmdc
1,123p13
-
-
1,123,4133
3665,369
Total current assets
23,768816
753513
133918
29,61
11877938
Noncurrent snots:
Restricted mob IN de 7)
1,550,726
-
-
1,550,726
-
Spe<alanenmentrecanetln
110,537
-
-
110,537
-
captalassets (Note d):
Nondirreciatle aPtal assets
' 'sad
1,81,968
3,542688
5,761
-
Oeyeciatle aptal assets- Net
63,298,781
3,87,852
1,116688
61,862,18
Tda noncurrent
assets
65652,853
5,119,000
4,698e88
75,270,761
Total assets
91,221,F5]
5,8]2513
6,832896
101,927,016
11877,938
Hai
Current hatelt es
Accounts teretes
301?os
50,010
69288
W1206
-
Duemdhergoernmentamnits
2,533c17
2,83617
-
Accrued add other ladht;n
127,65(3
15933
3,825
147,616
-
Deterred revenue (Nde13)
116,375
-
116,375
-
Boudanadi
So971
136839
-
27,016
-
coapendeaaaences-Due
within one year
195802
22287
52s6
aad3
-
Current Corton of low term
ote;gaeons
25,000
635,000
-
160,000
-
Total current liaN;t;es
3,89,335
659269
55369
6141
-
Nomurrentladl;t;n:
series nom restricteaasses
770,000
-
-
770,000
-
coapendeaaaences-Due;n
we than one year
196656
91,171
28,171
305,401
-
NetOPEBoteigat;m
1296!5
-
-
1296!5
-
Lmg4erm dN- Net of<urred
portion (Note 6)
5,035302
635,000
-
5,8o,302
2,116,726
Tda noncurrent
liateltes
6,131803
516,171
28,171
6,615}48
2,116,726
Total ladl;t;n
9'565338
1,175,110
86563
10,822,321
2,116,726
Net Position
Not investment in capital assets
57961290
6249,000
6®8866
W909,178
-
restricted- ordnance reylrenents
1,550,724
1,550,724
Unrestricted
25.149,315
448,103
4],3]5
25,61
9,]63212
Total net portion
$ 84,661,329 $
4,697,103
$ 4,716,263
$ 96104,695
$ 9,763212
The Notes to Financial Statements are an
Integral Part of this Statement. 17
City of Livonia, Michigan
Proprietary Funds
Statement of Revenue, Expenses, and Changes in Net Position
Year Ended November 30, 2013
The Notes to Financial Statements are an
Integral Part of this Statement. 18
Nmmmjor
Enterl+ae
Raton Enteryise Fund
Fund
Tata
waterand
Enternme
Internal Series
Sewer
Housng
GoffCourse
Fund
Fund
(tPenging R emc
Customer things
8 29.856699 8
-
8 -
8 29.856699
8 -
FinesantlMkiWres
1,937,620
-
-
1,937,620
-
Seracecmnecoms
33,035
-
33,035
-
Greemk¢
-
-
1,494,]63
1,494,]63
-
Gi fids
-
-
94520
94520
City <mViWom
-
V,A8369
Rental lnmmre
1,3511,117
3,000
1,357,11
Other revenue
8813]
325
11269
205,731
Total operatn9 revenue
31,975095
1,351402
I,]G9,r.56
35,039093
V,A8369
Operating Expen.sg
Cost ofwmer
9,88,160
-
-
9,88,160
-
Costofsewagecisp®I
Y2,P58}!9
-
-
Y2,P58j19
-
Srstemmsintenanceandcreraton
1,56I,]]6
-
-
1,56I,]]6
-
Generalandatlmnistrative
1,216,042
-
-
1,216,042
Reinsurance charges add dairm
-
11,905,826
41are andwages
-
405,754
1"038
Sf9,TR
-
suirties
-
N,E3!
209353
286,]8]
-
Otherservicesandcharges
46gi
13M'064
1,31]221
-
retroaction
2,674,681
141
127,577
2,919606
Total operating expenses
0.969013
1,tl35,690
I,8l
31,81
11,905,826
Operating lrcune grew)
1,006082
258,752
(115676)
1149,758
1,6Y2511
Nonoperating Revenue (Expenses)
Investment Income
51,356
1,600
481
56,437
6518
Interest wronse
(04319)
(42600)
-
(426919)
Gan on sale of assets
56,026
-
56,026
-
Otherroroleratingrevenue
-
269512
-
269512
-
TmIrorolerating(wromes)
revenue
(213935)
228512
681
(44942)
rims
Incame(Icm)-Be(we <mNWtimsantlirznsks
]3251]
481
(116,995)
1,104,816
1,811089
Call Contributions than Ocebpers and
Game
Gull grants
16,986
-
-
116,986
-
Caplalcmvithmms
215,001
-
-
235,661
-
Total wri mnNiwgahs num
dselopzrsandgrants
351,967
-
-
351987
-
TraiIn(NmeS)
-
-
36.000
38,000
-
ChangeinNetPmRian
1,834114
461
(76,935)
1,491003
1,831,089
Net Pmilicn-Be9imirg ofyear
81.A6,]95
4,209,839
4,M258
g2,W3092
8,82,123
Net Pmilicn-Endofyear
584,661,329 $
4,697,103
$ 4,746,M3
594,104,695
$ 9,70,212
The Notes to Financial Statements are an
Integral Part of this Statement. 18
City of Livonia, Michigan
Proprietary Funds
Statement of Cash Flows
Year Ended November 30, 2013
The Notes to Financial Statements are an
Integral Part of this Statement. 19
Nonfri
attar Enterprise Fund Entertains Fund
rated
Enternme Internal
Serves
Water andSewer
Hoi
CalfCwr
Fund
Fund
C6M1 Rors head Operating rlctirilig
temple frown cataners
8
33291,2,18 8
1,354,4t2 8
1.655.554 8
36,3822511 8
12,9285415
Payments to suppliers
(25,801
(518,681)
OMZ332)
(2],929,]11)
(12,,1385415)
Payments to emprgrees
(3,]3],589)
(,11],]83)
(1,11,90
(,1297,238)
Other resilis
21,195
3,965
-
25100
Not adh adamant (used In)
operating activities
3,728,871
488,100
(2],]02)
4,1884HB
498,881
Cash Fbxs head Noaagtal Financing
Activities- Nettram(ersfiomather Nnd
-
-
38800
38800
-
Cash FN.ws Van Cari and Release]
Nnancing Activities
Issuance of once
42646
-
-
42646
-
Receiliofaptalgrants
116,986
-
-
116,986
-
NetWrmasesofaPialasets
(12416,30
(12416,30
PrinciWl and Interest Mid on om4erm
dN
(1,897,6415)
(589,10
-
(160,794)
SeBleneni recelretlMaPtal Wrpaes
-
269.5fa
-
2695fa
-
Netcash esetllnaptalantl
rehtedfimncirgatliMies
(2,181,951)
(239637)
-
(2024,50
C6M1 Rors Van hassling Activation
Interest receivetl on mostnents
51,356
I,602
48I
M,tEa
8,518
Net purchases of investment acgnries
(756,5711)
(81,831)
(5,300)
(81
(1963,100)
Net men mod In Investing
acgnries
(741214)
(79,131)
(1,983)
(825,54)
(195.921)
Net Imrease meam e)in Cash and Cash
Equhaknts
]96986
81,832
5,3E
88532]
O"t6t.,920)
Cash and Cash Equivalents -
Beginning ofpar
7.687,982
295,8A
32831
8,815,775
3,967,818
and C-
Cash and Cash Equiraknis
End ar
S
8,,186,888 S
3]68]1 S
37AD S
1,1@
8,98 $
25@,898
Balance SM1cet C1am8icetion of Cash am
Cash Equivalents
Cash andinvestments
a
1381 a
753,723 a
74,817 a
14,788,88 a
8,,1325'4
Restrctetlessets(Note 7)
ij 08
ij 08
Less investments
(6935,581)
(376,672)
(37,424)
(7}19,600)
(4216,285)
rata) adh atlass ecraments
$
8,486,&18 $
3]68]1 $
37AD $
8,9111,10 $
421628,1
The Notes to Financial Statements are an
Integral Part of this Statement. 19
City of Livonia, Michigan
Proprietary Funds
Statement of Cash Flows (Continued)
Year Ended November 30, 2013
R niliation of Operating Ircane(Loss)
to Net Cosh fran Operating Activities
Operating lncoare (ton)
Pijustments to recmcile operating
inconse road to net ash tom
operating actiMia:
oePeciaga,
Changes In assets anchadfities:
Re babes
Inventor
sisterhood otherasets
Accounts tenons
Accrued and other laroges
oefaried revenue
Nonni
X4jw Entertains Fund Enterpise Fund
Taal Enterase Internal Senses
Water andSewer Housng GoffCourse Fund Fund
1,00,082 8 258,]'Y 8 (115,076) 8 1109,78 8 1' Y M1
2,610,684
11
11
2,9!9,60
-
(20,436)
-
(52982)
(73,024)
(619,821)
sin)
-
-
sin)
(1269.310)
2424
2424
136,596
(9,872)
1,981
him
3200,
-
116,on
(Bads)
Zito
1061rd
-
(1
3,965
P1113)
Net ash aro ided by
(usactimi¢)rnti� $ 3,R8,O11 $ 400,18o $ (2),102) $ 4,10,069 S 490,881
During the year ended IN overturn 30, 2013, the City recewd $235,001 of handled Ines reported as cental assets In the Wester and Sever
Fund
The Notes to Financial Statements are an
Integral Part of this Statement. 20
City of Livonia, Michigan
Fiduciary Funds
Statement of Fiduciary Net Position
November 30, 2013
Liabilities
Accounts payable
Pension and
$ 161,626
Due to other governmental units
Other
7,898,509
Due to primary government
Employee
-
Duetootherfunds
Benefits
Agency Funds
Assets
-
3,549,958
Cash and cash equivalents (Note 3)
$ 6,885,737
$ 12,452,618
Investments (Note 3):
8,670,198
$12,565,776
U.S. government securities
14,598,598
-
Construction loan
1,750,460
-
Collateralized mortgage obligations
11,864,326
-
Commonstock
126,084,013
-
Common bonds
25,277,449
-
Realestateinvestmenttrust
10,316,357
-
Foreign bonds
4,487,097
-
Mutual funds
106,325,502
-
Securities lending collateral po ll - Mutual funds
1,826,515
-
Accounts receivable
5,525
-
Due from agency funds
842,525
113,158
Total assets
310,264,104
$12,565,776
Liabilities
Accounts payable
6,097,280
$ 161,626
Due to other governmental units
-
7,898,509
Due to primary government
552,9114
-
Duetootherfunds
-
955,683
Accrued and other liabilities
-
3,549,958
Amounts due to broker under securities lending agreement
2,019,934
-
Total liabilities
8,670,198
$12,565,776
Net Position Held in Trust for Pension and Other Employee
Benefits
$ 301,593,906
The Notes to Financial Statements are an
Integral Part of this Statement.
City of Livonia, Michigan
Fiduciary Funds
Statement of Changes in Fiduciary Net Position - Pension and Other
Employee Benefits Trust Funds
Year Ended November 30, 2013
The Notes to Financial Statements are an
Integral Part of this Statement. 22
Pension and
Other
Employee
Benefits
Additions
Investment income (loss):
Interest and dividends
$ 7,340,972
Net charge in fair value of investments
44,857,506
Less investment expenses
(665,739)
Net investment income
51,532,739
Contributions:
Employer
8,525,832
Employee
1,047,844
Total contributions
9,573,676
Total additions
61,106,415
Deductions
Pension benefit payments
15,226,472
Medical benefit payments
7,164,104
Refunds of contributions
860,931
Administrative expenses
228,349
Total deductions
23,479,856
Net Increase in Net Position Held in Trust
37,626,559
Net Position Held in Trust for Pension and Other Employee Benefits -
Beginning of year
263,967,347
Net Position Held in Trust for Pension and Other Employee Benefits -
End of year
$ 301,593,906
The Notes to Financial Statements are an
Integral Part of this Statement. 22
City of Livonia, Michigan
Component Units
Statement of Net Position
November 30, 2013
The Notes to Financial Statements are an
Integral Part of this Statement. 23
Economic
Plymouth Road
Development
Development
Corporation
Authority
Total
Assets
Cash and cash equivalents
$ 23,619
$ 464,422 $
488,041
Accounts receivable
-
94,741
94,741
Capital assets (Note 4):
Nondepreciable capital assets
-
474,448
474,448
Depreciable capital assets- N at
5,671,571
5,671,571
Total assets
23,619
6,705,182
6,728,801
Liabilities
Accounts payable
-
67,992
67,992
Accrued and other liabilities
-
9,972
9,972
Noncurrent liabilities:
Due within one year
-
475,000
475,000
Due in more than one year
2,150,000
2,150,000
Total liabilities
-
2,702,964
2,702,964
Net Position
Net investment in capital assets
-
3,521,019
3,521,019
Unrestricted
23,619
481,199
504,818
Total net position
$ 23,619
$ 4,002,218 $
4,025,837
The Notes to Financial Statements are an
Integral Part of this Statement. 23
City of Livonia, Michigan
FunctioWProgmms
Eoononrc Development
General
n-
General government
Plymouth Road Development AuNonty
Community and econonrc
development
Interest on longterm @bt
Total Plymouth Road
Devebpment Authonty
Totalgovemmental
actiHties
The Notes to Financial Statements are an
Integral Part of this Statement. 24
Program Revenue
Operating
Capital Grants
Charges for
Grants and
and
Expenses Sertices
Contnbuhnns
Contnbuhnns
1 osa,7s8 -
-
-
127,920
1,191,678 -
-
-
$ 1,191,6]8 $
$
$
General revenue:
Property taxes
Interest
Total general revenue
Charge in Net Position
Net Position - Beginning of }ear
Net Position - End of year
The Notes to Financial Statements are an
Integral Part of this Statement. 24
Not (Expense) Rewnue an Changes in Net Posdion
Emmmic PNmo Road
DewlWment DewlWment
Co rahm Mftro Total
(1063,756) (1063,756)
(127,928)
(127,928)
- (1 is1s�8)
(1 is1s�8)
- (1 is1s�8)
(1 is1s�8)
- 699,5]8
699,5]8
25 ]3
96
25 899,651
899,6/6
25 (292,827)
(292,882)
23,594 4,294,20.5 4,317,839
$ 23,619 $ 4,882,218 $ 4,825,837
25
Component Units
Statement of Activities
Year Ended November 30, 2013
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 1 -Nature of Business and Significant Accounting Policies
The accounting policies of the City of Livonia, Michigan (the "City") conform to
accounting principles generally accepted in the United States of America (GAAP) as
applicable to governmental units. The following is a summary of the significant
accounting policies used by the City of Livonia, Michigan:
Reporting Entity
The City of Livonia, Michigan is governed by an elected seven -member council. The
Citys administration operates under the overall direction of an elected mayor. The
accompanying financial statements present the City and its component units. The
component units are entities for which the City is considered to be financially
accountable. Although blended component units are legally separate entities, in
substance, they are part of the Citys operations. The discretely presented component
units are aggregated and reported in a separate column in the government -wide financial
statements to emphasize that they are legally separate from the City (see discussion
below for description).
Blended Component Units - The Municipal Building Authority of Livonia is governed
by a board that is appointed by the mayor. Although it is legally separate from the City,
it is reported as if it were part of the primary government because its primary purpose
is to finance and construct the City's public buildings. The operations of the Municipal
Building Authority are reported as a nonmijor Debt Service Fund.
The District Court Funds of District No. 16 are reported within the Trust and Agency
Funds. Although it is legally separate from the City, it is reported as if it were part of the
primary government because of the fiduciary relationship it has with the City.
Discretely Presented Component Units - The Economic Development Corporation
(EDC) was created to provide means and methods for the encouragement and
assistance of industrial and commercial enterprises in relocating, purchasing,
constructing, improving, or expanding within the City so as to provide needed services
and facilities of such enterprises to the residents of the City. The EDC's governing
body, which consists of eight individuals, is selected by the mayor and approved by the
City Council. Internally prepared financial statements for the EDC can be obtained from
the City of Livonia Finance Department at 33000 Civic Center Drive, Livonia, MI 48154.
The Plymouth Road Development Authority was created to encourage additional
economic activity and growth in the Plymouth Road business district. The Plymouth
Road Development Authority's governing body, which consists of 12 individuals, is
selected by the mayor and approved by the City Council. Internally prepared financial
statements for the Plymouth Road Development Authority can be obtained from the
City of Livonia Finance Department at 33000 Civic Center Drive, Livonia, MI 48154.
26
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
The Brownfield Redevelopment Authority was created, pursuant to Public Act 381 of
1996, to promote revitalization of environmentally distressed areas within the 36 -square
mile boundary of the City. The Brownfield Redevelopment Authority is funded primarily
by property tax revenue capture. The Brownfield Redevelopment Authority is
governed by a nine -member board that is designated by the mayor and appointed by the
City Council.
The City has excluded the Housing Commission from this report. Even though the City
appoints the Housing Commission's directors, it does not have the ability to impose its
will.
Government -wide and Fund Financial Statements
The government -wide financial statements (i.e., the statement of net position and the
statement of activities) report information on all of the nonfduciary activities of the City
(the primary government, which includes the blended component unit) and its discretely
presented component units. The effect of interfund activity has been removed from
these statements. Governmental activities, normally supported by taxes and
intergovernmental revenue, are reported separately from business -type activities, which
rely to a significant extent on fees and charges for support. Likewise, the primary
government is reported separately from certain legally separate cortponent units for
which the primary government is financially accountable.
The statement of activities demonstrates the degree to which the direct expenses of a
given function (governmental activities) or segment (business -type activities) are offset
by program revenue. Direct expenses are those that are dearly identifiable with a
specific function or segment. Program revenue includes (1) charges to customers or
applicants who purchase, use, or directly benefit from goods, services, or privileges
provided by a given function or segment and (2) grants and contributions that are
restricted to meeting the operational or capital requirements of a particular function or
segment. Taxes and other items not applicable to specific programs are reported
instead as general revenue.
Separate financial statements are provided for governmental funds, proprietary funds,
and fiduciary funds, even though the latter are excluded from the government -wide
financial statements. Major individual governmental funds and major individual enterprise
funds are reported as separate columns in the fund financial statements.
27
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
Measurement Focus, Basis of Accounting, and Financial Statement
Presentation
The government -wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting, as are the proprietary fund,
fiduciary fund, and component unit financial statements. Revenue is recorded when
earned and expenses are recorded when a liability is incurred, regardless of the timing
of related cash flans. Property taxes are recognized as revenue in the year for which
they are levied. Grants and similar items are recognized as revenue as soon as all
eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial
resources measurement focus and the modified accrual basis of accounting. Revenue is
recognized as soon as it is both measurable and available. Revenue is considered to be
available if it is collected within the current period or soon enough thereafter to pay
liabilities of the current period. For this purpose, the City considers revenue to be
available if it is collected within 60 days of the end of the current fiscal period. The
following major revenue sources meet the availability criterion: state -shared revenue,
state gas and weight tax revenue, district court fines, and interest associated with the
current fiscal period. Conversely, special assessments and certain federal grant
reirrbursements will be collected after the period of availability; receivables have been
recorded for these, along with a "deferred revenue' liability.
Expenditures generally are recorded when a liability is incurred, as under accrual
accounting. However, debt service expenditures, expenditures relating to compensated
absences, and daims andjudgments are recorded only when payment is due.
The City reports the following major governmental funds:
General Fund - The General Fund is the City's primary operating fund. It accounts for
all financial resources of the general government, except those required to be
accounted for in another fund.
Community Recreation Fund - The Community Recreation Fund amounts for the
activities of the Livonia Community Recreation Center, ice rinks, and certain other
recreation activities. Funding is provided primarily by a local dedicated property tax levy
and user charges.
Refuse Disposal Fund - The Refuse Disposal Fund amounts for the operations of the
refuse disposal activities of the City. Funding is provided primarily through a local
dedicated property tax levy.
28
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
The City reports the following major proprietary funds:
Water and Sewer Fund- The Water and Sewer Fund accounts for the activities of the
water distribution system and sewage collection system. Funding is provided primarily
through user charges.
Housing Fund - The Housing Fund accounts for the Newburgh and Silver Village
residential rental facilities. Funding is provided primarily through user charges.
Additionally, the City reports the following internal service and fiduciary activities:
Internal Service Fund - The Internal Service Fund is used to fund general, workers'
compensation, and employee healthcare liability claims and to purchase insurance that
provides excess general liability coverage for City employees and property. The fund is
financed primarily by charges to the various departments of the City.
Pension and Other Employee Benefits Trust Fund - The Pension and Other
Employee Benefits Trust Fund accounts for the activities of employee beneFd plans that
accumulate resources for pension and other postemployment beneFd payments to
qualified employees.
The City of Livonia Employees' Retirement System and the City of Livonia Health and
Disability Plan have been blended into the Citys financial statements. These systems are
governed by a five -member pension board that includes three individuals chosen by the
City Council andlor the mayor. The systems are reported as if they were part of the
primary government because of the fiduciary responsibility that the City retains relative
to the operations of each system. The operations of the Employees' Retirement System
and the City of Livonia Health and Disability Plan are reported as a Pension and Other
Employee Benefits Fiduciary Fund.
Agency Funds - The Agency Funds account for assets held by the City in a trustee
capacity. Agency Funds are custodial in nature (assets equal liabilities) and do not
involve the measurement of results of operations.
As a general rule, the effect of interfund activity has been eliminated from the
government -wide financial statements. Exceptions to this general rule are charges
between the City's water and sewer function and various other functions of the City.
Eliminations of these charges would distort the direct costs and program revenue
reported for the various functions concerned.
29
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
Amounts reported as program revenue include (1) charges to customers or applicants
for goods, services, or privileges provided, (2) operating grants and contributions, and
(3) capital grants and contributions, inducing special assessments. Internally dedicated
resources are reported as general revenue rather than as program revenue. Likewise,
general revenue includes all taxes.
When an expense is incurred for the purposes for which both restricted and
unrestricted net position or fund balances are available, the City's policy is to first apply
restricted resources, except for the Community Recreation Fund and Capital
Improvement Fund, which apply unrestricted fund balance first. When an expense is
incurred for purposes for which amounts in any of the unrestricted fund balance
classifications could be used, it is the City's policy to spend funds in this order:
committed, assigned, and unassigned. This is true for all funds except the Community
Recreation Fund and Capital Improvement Fund. As noted above, the policy for these
funds is to use unrestricted funds first; therefore, the order of spending is unassigned,
restricted, committed, and assigned.
Proprietary funds distinguish operating revenue and expenses from nonoperating items.
Operating revenue and expenses generally result from providing services and producing
and delivering goods in connection with a proprietary fund's principal ongoing
operations. The principal operating revenue of the City's proprietary fund (Water and
Sewer Fund) relates to charges to customers for sales and services. The Water and
Sewer Fund also recognizes the portion of tap fees intended to recover current costs
(i.e., labor and materials to hook up new customers) as operating revenue. The portion
intended to recover the cost of the infrastructure is recognized as nonoperating
revenue. Operating expenses for proprietary funds include the cost of sales and
services, administrative expenses, and depredation on capital assets. All revenue and
expenses not meeting this definition are reported as nonoperating revenue and
expenses.
Property Tax Revenue
Properties are assessed as of December 31 and the related property taxes become a
lien when billed. These taxes are billed on duly 1 and December 1 ofthe following year,
and are due on September 14 and February 14, respectively. After the final collection
on the last day of February, real property taxes are added to the county tax rolls. The
2012 taxable valuation of the City totaled $3.98 billion. Properties in the Plymouth Road
Development Authority (PRDA) are assessed a millage of 2.0000 on duly 1. The 2013
taxable valuation of PRDA totaled $491 million. The millages levied by the City and the
resulting revenue are as follows:
30
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
Approximate
These amounts are recognized in the respective General, Special Revenue, Debt
Service, and Plymouth Road Development Authority Funds financial statements as tax
revenue.
The delinquent real property taxes of the City are purchased by Wayne County (the
"County'). The County sells tax notes, the proceeds of which are used to pay the City
for these property taxes. Wayne County remitted its purchased delinquent real
property taxes in June 2013. Wayne County delinquent real property taxes have been
recorded as revenue in the current year.
Assets, Liabilities, and Net Position or Equity
Bank Deposits and Investments - Cash and cash equivalents include cash on hand,
demand deposits, and short-term investments with a maturity of three months or less
when acquired. Investments are stated at fair value. Pooled investment income from
the Investment Agency Fund is generally allocated to each fund using a weighted average
balance for the principal held for each fund on a daily basis.
Receivables and Payables - In general, outstanding balances between funds are
reported as "due to/from other funds." Any residual balances outstanding between the
governmental activities and the business -Type activities are reported in the government -
wide financial statements as "internal balances." All trade and property tax receivables
are shown as net of allowance for uncollectible amounts.
Millage
Revenue
Purpose of Millage
Rate
(in millions)
Operating purposes
4.0447
$ 15.49
Police and fire
0.8088
3.10
Police and fire and snow
1.2134
4.65
Library
0.8088
3.09
Refuse and recycling
2.8746
10.97
Industrial development
0.0128
0.05
Roads, sidewalks, and trees
0.8893
3.40
Recreation
0.7855
3.01
Public safety
1.7000
6.51
Culture and senior services
0.2500
0.96
Transit and capital improvement
0.5000
1.91
Plymouth Road Development Authority
2.0000
0.88
These amounts are recognized in the respective General, Special Revenue, Debt
Service, and Plymouth Road Development Authority Funds financial statements as tax
revenue.
The delinquent real property taxes of the City are purchased by Wayne County (the
"County'). The County sells tax notes, the proceeds of which are used to pay the City
for these property taxes. Wayne County remitted its purchased delinquent real
property taxes in June 2013. Wayne County delinquent real property taxes have been
recorded as revenue in the current year.
Assets, Liabilities, and Net Position or Equity
Bank Deposits and Investments - Cash and cash equivalents include cash on hand,
demand deposits, and short-term investments with a maturity of three months or less
when acquired. Investments are stated at fair value. Pooled investment income from
the Investment Agency Fund is generally allocated to each fund using a weighted average
balance for the principal held for each fund on a daily basis.
Receivables and Payables - In general, outstanding balances between funds are
reported as "due to/from other funds." Any residual balances outstanding between the
governmental activities and the business -Type activities are reported in the government -
wide financial statements as "internal balances." All trade and property tax receivables
are shown as net of allowance for uncollectible amounts.
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
Inventories and Prepaid Items - Inventories are valued at cost, on a first -in, first -out
basis. Inventories of governmental funds are recorded as expenditures when consumed
rather than when purchased. Certain payments to vendors reflect costs applicable to
future fiscal years and are recorded as prepaid items in both government -wide and fund
financial statements. In inventory where real estate is included, the inventory is valued
at the lower of cost or market
Restricted Assets- The revenue bonds ofthe Enterprise Funds require amounts to be
set aside for construction, debt service principal and interest, operations and
maintenance, and a bond reserve. These amounts have been classified as restricted
assets.
Capital Assets - Capital assets, which include property, plant, equipment, and
infrastructure assets (i.e., roads, bridges, sidewalks, and similar items), are reported in
the applicable governmental or business -type activities column in the government -wide
financial statements. Capital assets are defined by the City as assets with an initial
individual cost of more than $5,000 and an estimated useful life in excess of one year.
Such assets are recorded at historical cost or estimated historical cost if purchased or
constructed. Donated capital assets are recorded at estimated fair market value at the
date of donation.
Buildings, equipment, and vehicles are depreciated using the straight-line method over
the following useful lives:
Infrastructure 33 to 40 years
Road rights 33 years
Buildings and improvements 20 to 50 years
Machinery, equipment, and vehicles 2 to 20 years
Water and sewer distribution systems 50 years
Compensated Absences (Vacation and Sick Leave) - It is the City's policy to permit
employees to accumulate earned but unused sick and vacation pay benefits. Under the
Citys policy, employees earn benefits based on time of service with the City. All
vacation and sick pay is accrued when incurred in the government -wide and proprietary
fund financial statements. A liability for these amounts is reported in governmental
funds only for employee terminations as of year end.
32
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
Long-term Obligations - In the government -wide financial statements and the
proprietary fund types in the fund financial statements, long-term debt and other long-
term obligations are reported as liabilities in the applicable governmental activities,
business -type activities, or proprietary fund -type statement of net position. Bond
premiums and discounts, as well as issuance costs, are deferred and amortized over the
life of the bonds using the effective interest method. Bonds payable are reported net of
the applicable bond premium or discount. Bond issuance costs are reported as deferred
charges and amortized over the term of the related debt. In the fund financial
statements, governmental fund types recognize bond premiums and discounts, as well
as bond issuance costs during the current period. The face amount of debt issued is
reported as other financing sources. Premiums received on debt issuances are reported
as other financing sources while discounts are reported as other financing uses. Issuance
costs are reported as debt service expenditures.
Pension and Other Postemployment Benefit Costs - The City offers both pension
and retiree healthcare benefits to retirees. The City receives an actuarial valuation to
compute the annual required contribution (ARC) necessary to fund the obligation over
the remaining amortization period. In the governmental funds, pension and other
postemployment benefit costs are recognized as contributions are made. For the
government -wide statements and proprietary funds, the City reports the full accrual
cost equal to the current year required contribution, adjusted for interest and
"adjustment to the ARC" on the beginning of year underpaid amount, if any.
Fund Equity - In the fund financial statements, governmental funds report the following
components of fund balance:
• Nonspendable: Amounts that are not in spendable form or are legally or contractually
required to be maintained intact
• Restricted: Amounts that are legally restricted by outside parties, constitutional
provisions, orenabling legislation for use for a specific purpose
• Committed: Amounts that have been formally set aside by the City Council for use
for specific purposes. Commitments are made and can be rescinded only via
resolution of the City Council.
• Assigned: Intent to spend resources on specific purposes expressed by the City
Council orthe finance director, who is authorized by resolution approved by the City
Council to make assignments
33
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 1 -Nature of Business and Significant Accounting Policies
(Continued)
• Unassigned: Amounts that do not fall into any other category above. This is the
residual dassification for amounts in the General Fund and represents fund balance
that has not been assigned to other funds and has not been restricted, committed, or
assigned to specific purposes in the General Fund. In other governmental funds, only
negative unassigned amounts are reported, if any, and represent expenditures
incurred for specific purposes exceeding the amounts previously restricted,
committed, or assigned to those purposes.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
period. Actual results could differ from those estimates.
Note 2 - Stewardship, Compliance, and Accountability
Construction Code Fees - The City oversees building construction, in accordance
with the State's Construction Code Act, including inspection of building construction
and renovation, to ensure compliance with the building codes. The City charges fees for
these services. The law requires that collection of these fees be used only for
construction code costs, including an allocation of estimated overhead costs. A
summary of the current year activity and the cumulative surplus or shortfall generated
sincedanuary 1, 2000 is as follows:
Cumulative shortfall at December 1, 2012 $ (1,523,353)
Current year building permit revenue 1,801,162
Related expenses:
Direct costs $ 1,232,386
Estimated indirect costs 367,030 1,599,416
Current year net revenue
201,746
Cumulative shortfall at November 30, 2013
$ (1,321,607)
34
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 3 - Deposits and Investments
Michigan Compiled Laws Section 129.91 (Public Act20 of 1943, as amended) authorizes
local governmental units to make deposits and invest in the accounts offedeally insured
banks, credit unions, and savings and loan associations that have offices in Michigan. A
local unit is allowed to invest in bonds, securities, and other direct obligations of the
United States or any agency or instrumentality of the United States; repurchase
agreements; bankers' acceptances of United States banks; commercial paper rated
within the two highest classifications, which matures not more than 270 days after the
date of purchase; obligations of the State of Michigan or its political subdivisions, which
are rated as investment grade; and mutual funds composed of investment vehicles that
are legal for direct investment by local units of government in Michigan.
The Pension Trust Fund and Retiree Health Care Fund are also authorized by Michigan
Public Act 347 of 2012 to invest in certain reverse repurchase agreements, stocks,
diversified investment companies, annuity investment contracts, real estate leased to
public entities, mortgages, real estate (if the trust fund's assets exceed $250 million),
debt or equity of certain small businesses, certain state and local government
obligations, and certain other specified investment vehicles.
The City has designated six banks for the deposit of its funds. The investment policy
adopted by the Council in accordance with Public Act 196 of 1997 has authorized
investment in bonds and securities of the United States government and bank accounts
and CDs. The City's deposits and investment policies are in accordance with statutory
authority.
As permitted by state statutes and under the provisions of a securities lending
authorization agreement, the City of Livonia Employees' Retirement System (the
"System") (see Note 9) lends securities to broker-dealers and banks for collateral that
will be returned for the same securities in the future. The System's custodial bank
manages the securities lending program and receives cash as collateral. Borrowers are
required to deliver collateral for each loan equal to not less than 100 percent of the
market value of the loaned securities. During the year ended November 30, 2013, only
United States currency was received as collateral. The City then converts that cash
received as collateral into other investments.
The System imposes a limit of $4 million during the fiscal year on the amount of loans
made on its behalf by the custodial bank. There were no failures by any borrowers to
return loaned securities or pay distributions thereon during the fiscal year. Moreover,
there were no losses during the fiscal year resulting from a default of the borrowers or
custodial bank.
35
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 3 - Deposits and Investments (Continued)
The City of Livonia Employees' Retirement System and the borrower maintain the right
to terminate all securities lending transactions on demand. The cash collateral received
on each loan was invested, together with the cash collateral of other lenders, in an
investment pool. The average duration of such investment pools as of November 30,
2013 was one day because the loans are terninable on demand; their duration did not
generally match the duration of the investments made with cash collateral. On
November 30, 2013, the System had no credit risk exposure to borrowers. The
collateral held (cost basis) and the fair market value of the underlying securities on loan
forthe System as of November 30, 2013 were $2,019,934 and $1,826,515, respectively.
The City's cash and investments are subject to several types of risk, which are examined
in more detail below:
Custodial Credit Risk of Bank Deposits
Custodial credit risk is the risk that in the event of a bank failure, the City's deposits may
not be returned to it. The City does not have a deposit policy for custodial credit risk.
At year end, the City had $38,767,796 of bankdeposits (certificates of deposit, checking,
and savings accounts) that were uninsured and uncollateralized. In addition, the District
Court, a component unit, had $1,779,126 of bank deposits (checking and savings
accounts, certificates of deposit) that were uninsured and uncollateralized. The City
believes that due to the dollar amounts of cash deposits and the limits of FDIC
insurance, it is impractical to insure all deposits. As a result, the City evaluates each
financial institution with which it deposits funds and assesses the level of risk of each
institution; only those institutions with an acceptable estimated risk level are used as
depositories.
Interest Rate Risk
Interest rate risk is the risk that the value of investments will decrease as a result of a
rise in interest rates. The Citys investment policy does not restrict investment
maturities, other than commercial paper which can only be purchased with a 270 -day
maturity. At year end, the average maturities of investments areas follows:
prIMR aoeernment FarWW 9ro5Y®a 6m19Ymrs Drer 10Ymm
Os. weryeemrlea s 63nM s 22,7996 $ 3621 p6 s -
comma®Ipapa 131$515 138,515
T✓s s 27,72798 s 2e 1W 5M $ 3641e s
C" of lFrons Fpbyss' Rairement Wm FANLe oto5Y®rs filo OYmrs Dwr1RYmm
capae[e�s 10170F s 6imm $ 7M79 s 428 M
Faelgn Dorms 3190,732 1 1576 1M M5 221751
35.8er wmrbm 7060,907 56,@9 82,591 BWW
LLS. Tr�rY�rltla 17MW9 215iM 39i2A 1 213
Cd emllxe4rt eo]mm 0339611 26,1W 1M= ficom
Td i s 33,957@6 s 3110613 $ 12126,919 s 1071956/
M$
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 3 - Deposits and Investments (Continued)
City on Lome mseee Head" and Disbday
earns: Plan air vme May®R into 10 van Dyer notice
Corporate bond s
7106,®2 s
2 mr142 s
3275M s
1125501
rorelgnbord
1u2as
515049
Gel
70072
O5. a2em dee
235,1419
65,3s0
2292aa
2,Deep
Os. Triyouryseal
2,412,213
351,0P3
de) 006
1,341021
caaserauied anal mlnesaie —3524sai
90,047
734 in
2,700505
Toral s 17270,374 s 3725,714 a 5733,61 s 7"Posi9
Credit Risk
State law limits investments in commercial paper to the top two ratings issued by
nationally recognized statistical rating organizations. The City has no investment policy
that would further limit its investment choices. As of year end, the credit quality ratings
of debt securities (other than the U.S. government) areas fol lows:
Rating
Inveshnent Fair Value Rating Organization
Primary Government
Bank investment pods $ 1]83,071 Aaa Mootlys
U 5. agencies securi0es 26,379,385 Aaa Mootlys
Commercial paper 1348,515 P-1 Mootlys
Total $ 29,430,971
Fiduciary Funds
Corporate bond
$
1371565
AM
68P
Corporate bond
3,729,229
M
58P
Corporate bond
6,588,]9]
A
58P
Corporate bond
11248,474
BBB
58P
Corporate bond
1246,626
BB
58P
Corporate bond
10,200
B
58P
Corporate bond
1170,556
NR
58P
Foreign bonds
581,820
M
58P
Foreign bonds
999,966
A
58P
Foreign bonds
21A,563
BBB
58P
Foreign bonds
72],]28
BB
58P
US. agencies securities
1 G7n/,842
M
58P
US. agencies securites
552,142
A
58P
US. agencies social
8,289,422
NR
58P
US. Treasury securities
4,279,192
NR
58P
Cdlateralized mortgage obligations
204,974
AM
58P
Cdlateralized mortgage obligations
2,081390
M
58P
Cdlateralized mortgage obligations
2,195,282
A
58P
Cdlateralized mortgage obligations
1534,639
BBB
58P
Cdlateralized mortgage obligations
5,848,041
NR
Na
Total
$
56,22],4]0
Component Unib - Bank investment pools
$
464,422
Aaa
Mootlys
krs
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 4 - Capital Assets
Capital asset activity of the City's governmental and business -type activities and
component unit was as follows:
38
Balance
Balance
oece niaer 1,
Nevennber 30,
2812
Retlasilatims
Acclims
tell
2013
f nmenNU¢rivilia
GpUI mets nd Wing
deprecated
laic
8 3.851019
8 8
12, 8
-
8 3.863.765
Cmstruclim in ac9res
Ao,388
(135632
snxD
252391
suaaal
35,611$07
(135632
83o616
-
35,116,156
Capital mi Wing Rpecialed
ll
103150074
-
4389616
-
101,539]2o
Ratlrights
8,393601
B7274
8,838875
tailings antl lnnarwenrenta
1W,413,9,15
1133.0]2
60,860
(49,170)
187,618,787
E4iprenlandvahl
31'W'eTio
223255
2,o16MO
(189,797)
33,46]658
suddal
M'M528o
1355327
6,S432o
(1898,967)
26]386968
4ccumilatea Rpecialim:
InhslrmWre
43119,752
-
3,37,894
-
46.1]]646
Ratlrights
7,860803
-
57,493
8418296
tailings antl lnnarwenrenta
M'no819
-
2,M5]3]
(983)
42.835683
E4iprenlandvahl
21,117213
2,40$626
(1032,768)
21.8338]1
suddal
111&8617
8,329750
(1693,751)
118464616
Net aphi sets bung dsPreciaten
ygt'3,653
1355327
(1A5143o)
M5216)i
148,843344
Net aPta'asob
8 184,938070
8 - 8
(]44,]51) 8
(M5216)
$ 183,958588
38
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 4 - Capital Assets (Continued)
daze dance
oeemeer 1, Novembar 30,
2812 Reclassifiatima Aditima tell 2013
Nes1raes:bPenNNme
8 4]4,448 8
- 8
4]4,448
Captalasetsbeing RpeciateJ- landimprwmren[s
1153322]
Qptal assets not berg
15,3322]
PicumJateJRpeciatim- landimprwmren[s
9.X6,495
35161
10,031656
Rpeciated
6,456,32
(35161)
5,6]15]1
Net deal assets
8 6,931180 8
Land 8
5.1151'r36 8
8
8
- 8
5,1151"13(1
CmNructim in progress
158,624
(1,35!839)
I,0N,196
'@2891
suWNal
6,023868
(1,354839)
I,0N,186
-
5,741
Captal assets ming tlepeciated
Water and sewer tlutributim
1Ni,3t9,889
'1,3548A
1113288
-
1N,A8,016
Buldrgs and burning
Imywemen6
9,483,866
-
-
-
9483888
XA<M1nery antle4ipneN
2,116}52
-
2,129352
Verses
1']6
-
3EM514
(334324)
1.829]32
Land imprwmren[s
2,916,844
2.916844
suddal
142,534,412
'1,3548A
' 18w
(331
14,0]],832
Ac<u
and tlsViWtim
Watings
R,EFb 985
-
2,'x],626
-
65,E4jU
and to
turnings and Wiltlig
im
,616,628
-
186946
-
,M,x£
ande[s
Vehicles antle4ipneN
1,848,853
-
88119
1,9289]2
Venids
1,W3,461
-
93583
(Z18,]]9)
1,426,185
Land impwerren[s
2,W8213
53,410
2,611 1,623
suddal
73,536,052
2,919606
(Z18,]N)
3,214879
Net cartel assets being deVeciated
63.938 F68
1,354839
Q42],SM)
(63,442)
a,HG2,153
Net aptal assets 8
]5,821,]28 8
- 8
(1348,698) 8
(63,442) 8
3.W3088
dance dame
December 1, November 30,
2012 Aditims 2013
CanporeN Ilnils- P[PnoNM1 Rutl OerelagneN slutM1aily
Captal assets not bens esVeaateJ-!antl
8 4]4,448 8
- 8
4]4,448
Captalasetsbeing RpeciateJ- landimprwmren[s
1153322]
-
15,3322]
PicumJateJRpeciatim- landimprwmren[s
9.X6,495
35161
10,031656
Net deal assets being delarmiated
6,456,32
(35161)
5,6]15]1
Net deal assets
8 6,931180 8
(35.161) s
6,'W6,019
39
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 4 - Capital Assets (Continued)
Depreciation expense was charged to programs ofthe primarygovernment as follows:
Governmental activities:
2,674,684
General government
$ 664,687
Public safety
1,524,794
Public works
4,294,566
Recreation and culture
1,935,793
Total governmental activities
$ 8,329,750
Business -type activities
Water and sewer
$
2,674,684
Golf course
127,577
Newburgh and Silver Village
147,345
Total business-typeactimbes
$
2,949,606
Construction Commitments - The City has active construction projects at year end.
At year end, the City's commitments with contractors are as follows:
Remaining
Spentto Date
Commitment
Street and sidewalk projects
$ 6,777,808
$ 2,950,128
Dain and sewer projects
343,635
2,601,781
Park improvements
160,363
266,590
Equipment
138,078
2,459,184
City hall improvements
318,015
119,090
40
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 5 - Interfund Receivables, Payables, and Transfers
Receivable Fund Payable Fund Amount
Due to/from Other Funds
General Fund Nonmajorgovernmental funds $ 158,814
VEBA Fund Investment Administration Agency
Fund 785,721
Employees' Retirement System Fund Investment Administraton Agency
Fund 56,804
Court Depository Agency Fund Court Bond Agency Fund 86,452
Court Volunteer Work Program Agency
Fund Court Bond Agency Fund 22,346
Court Civil Drug Agency Fund Court Bond Agency Fund 4,380
Total $ 1,114,487
These balances result from the time lag between the dates that goods and services are
provided or reimbursable expenditures occur, transactions are recorded in the
accounting system, and payments between funds are made.
Interfund transfers reported in the fund financial statements are comprised of the
foliming:
Transfer Out Transfer In Amount
General Fund Nonmajorgovernmental funds $ 2,608,926 '
Golf Course Fund 38,000 '
Community Recreation Fund Nonmajor governmental funds 2,669,951 "
Nonmajor governmental funds General Fund 40,000
Nonmajorgovernmental funds 2,239,955 ••••
Total $ 7,596,832
` Transfer of unrestdcted resources to 8mnce capital project and general obligation debt
service in accomance with budgetary authorizations
" Transfer from the Community Recreation Fund for debt service
... Transfer from Cable Television Fund to General Fund to move unrestricted fund balance
.... The majority of transfers are for gas and weight tax revenue from the Major Streets Fund
to the Local Streets Fund and from these funds to the Road and Sidewalk Fund in
accordance with Act 51. Most of the remaining transfers relate to debt service.
41
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 6 - Long-term Debt
The City issues bonds to provide for the acquisition and construction of major capital
facilities. General obligation bonds are direct obligations and pledge the full faith and
credit of the City. Capital lease obligations are also general obligations of the
government. Special assessment bonds provide for capital improvements that benefit
specific properties, and will be repaid from amounts levied against those properties
benefited from the construction. In the event that a deficiency exists because of unpaid
or delinquent special assessments at the time a debt service payment is due, the City is
obligated to provide resources to cover the deficiency until other resources (such as tax
sale proceeds or a reassessment of the City) are received. Revenue bonds involve a
pledge of specific income derived from the acquired or constructed assets to pay debt
service.
Long-term debt activity can be summarized as follows:
mturat Principal
Me Maturity Beginning Ends Due when
Rage= Range= Balance Adtons Recitations Balance One year
GovernmentaUmtiuities
Building Authority Bonds:
2005 MBA refunding Bmd<
Amoumi-$3,730,000
390%-
$155,05 -
Maturing through 2025
425%
Bel
$ 2,455,000 $
-
$ (275,000)$
2580,000 $
275,000
2007 MBA refunding Dome
Amounmrrsue-$31,025,000
400%-
$135s,000 -
Maturing through Z30
as%
$1,705,000
28.5 oo
-
(1240,000)
27305,000
1,355,000
2008 MBA Cmtl Construction
Bond
Amountofisue-$8500,000
375%-
$235,083 -
Maturing through 2033
525%
5580,000
7,005,000
-
(225,000)
7,660,000
235,000
Total gouemmental
activity Rd
39,285,000
-
(1740,000)
37,5g[5,000
I,E65,000
Other long-@rm odigatims:
General really caina,workere
nmpenstion, and heath
a�n(Note 8)
2,]64549
-
(649W
2,114,721
-
IandrJdolethiat<Imure
hourly
592,140
254
-
592391
-
OPEBreally
2,2]4,767
689,45
2,964,20
Corryemz@dau:ences
9,111
2547,6£1
(3,038,510)
8,625,593
2874,910
Total
acB„tismmental
SS4.R32898 $323],351
$(5628.3%)$518419V $4,]39,910
42
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 6 - Long-term Debt (Continued)
Interest Pnncllnl
Rate Maturity Beginning Ending Due Witht
Ramses Ranges Balance Acdl Reductions Balance One Year
BusiressfIl AmMilies
Building Nithorty Bmd:
209 WA Refunding Bmd:
Amour ofisue-a3,380o0D
Maturing through M15 100% g 000 $?33s,00Ds
Weser Supply adwaste.ater
-
System Bmd:
1150,000
20B Slate of Morgan Clean
99,110
Weser Program Slate ReMvirg
Loan:
Amoumofisue-&3620OJ0
8125,W0
Maturing through MM
200% 82200W
203 waterSupAyand
Waata-,ater system Revenue
Bmd:
Pmwntofisue-U.M.W0
375%- 53300W -
Maturing through MO
5W% $4000W
zoos WaterSupAyand
Wadmater Sestem Revenue
Refundrg Bond:
Amountofisue U,110O00
375%- $ 0W -
Maturing through Z20
5W% $ DW
Less deferred amount m
refunding
Total dsine�tyge
adi ly dN
Counlycomratual nNigatims:
Slate Rervdving EundLoan-
N. Hurm Valley/Rorge Valley
WstmaterCmtrd System:
Pmmntofmane -
810,02d,7D3
Maturing through 2021
225% 55,000
Other Img4erm odigatims:
OPEB really
CorrpematedaWemes
Total dsine�ty
acti lis
Total gouemmental and
Wsinesty actirlies
2,90,000
- s (a .DOol 90,000 $ 415,000
az,W - az,W -
- (315,000) 2,00,O00 330,000
3,535000 - (M0000) 3,M5,000 410,000
(zi,w) (3,1897 (B6.]M)
7,663,359 42,016 (1,11M,103) 6,550,302 ? M5,ODD
170,000
-
(20,000)
1150,000
n'000
99,110
30535
T23615
560653
195,032
(226,939)
526,706
223315
8,193,122 2b1,613 (? 002,412) 7,358,693 1,Z33415
W.526,D20 8 3,500 Wd 8 (6,830,378) S59,2D0606 86,193255
eomPonem unn Acmmes
20%Dmdmn Developnem
Refunding Bmd:
Amoumnfisue-$0p]0WD azs%- $175,ODD-
Maturing through Mot 5O0% Y70O00 6320,000s - s (155,000)s 2,5L',000$ 015,000
43
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 6 - Long-term Debt (Continued)
Annual debt service requirements to maturity for the above bonds and note obligations
are as follows:
.
Revenue Bonds The City has pledged substantially all revenue of the Water and
Sewer Fund, net of operating expenses, to repay the above water and sewer revenue
bonds. Proceeds from the bonds provided financing for improvements to the water and
sewer system. The bonds are payable solely from the net revenues of the water and
sewer system. The remaining principal and interest to be paid on the bonds total
approximately $6.7 million. During the current year, net revenue of the system was
approximately $3.9 million compared to the annual debt requirements of approximately
$1.6 million.
During fiscal year 2013, the City was approved for a State of Michigan Clean Water
Program State Revolving Loan in the amount of $3,620,000. Proceeds from the loan are
to provide for the acquisition and construction of additions, extensions, and
improvements to the water supply and wastewater system of the City of Livonia. During
the year, the City drew down $42,046 of the authorized debt amount The project is
still ongoing and the City expects to draw down the full amount before principal
payments began in 2015.
No Commitment Debt - The City has issued Industrial Development Revenue Bonds
and Economic Development Corporation Bonds under state law which authorizes
municipalities under certain circumstances to acquire and lease industrial sites, buildings,
and equipment and lease them to third parties. The revenue bonds issued are payable
solely from the net revenue derived from the respective leases and are not a general
obligation of the City. After these bonds are issued, all financial activity is taken over by
the paying agent. The bonds and related lease contracts are not reflected in the City's
financial statements. Information regarding the status of each bond issue, including
possible default, must be obtained from the paying agent or other knowledgeable
source. The aggregate original issue amountwas $81,422,000.
44
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 7 - Restricted Assets
Business -Type Activities - In accordance with the provisions of the Water Supply and
Wastewater System Revenue bonds, the City is required to set aside monies in a bond
reserve account. At November 30, 2013, the City set aside $1,550,724 of cash and cash
equivalents to comply with these requirements.
Note 8 - Risk Management
The City is exposed to various risks of loss related to property loss, torts, errors and
omissions, and employee injuries (workers' compensation), as well as medical benefits
provided to employees. The City has purdiased commercial insurance for medical
benefits and workers' compensation and participates in the Michigan Municipal Risk
Management Authority (the "Authority').
The Midiigan Municipal Risk Management Authority risk pool program operates as a
claims servicing pool for amounts up to member retention limits and operates as a
common nsk-sharing management program for losses in excess of member retention
amounts. Although premiums are paid annually to the Authority that the Authority uses
to pay claims up to the retention limits, the ultimate liability for those claims remains
with the City.
The City estimates the liability for general liability, workers' compensation, and medical
claims that have been incurred through the end of the fiscal year, including daims that
have been reported as well as those that have not yet been reported. These estimates
are recorded in the Self-insurance Internal Service Fund. The estimated liability for
property loss, general liability, workers' compensation, and medical claims is recorded
within the governmental activities column in the statement of net position. Changes in
the estimated liability for the past two fiscal years were as follows:
Genera'Labllly wotl:ms'cannm atiw Med lc6ims
2013 2012 2013 2012 2013 2012
intinnledhaNlly
B6innngofraf
$ 799E40 $
932914 $
963,856 $
1.992927 $
990,303 $
793291
intinxleddainm
incurred indudM
changes In estinrelin
9,61,795
1,93690
185,953
(400535)
12,101105
12,838,596
claimmyrrenls
(W.488)
(1,315,961)
(368,595)
(68586)
(12,613,103)
1
Eslinn ledIiaNily- End
ofyeaf
S 65.747 S
790,640 $
60,674 $
963806 $
MUM $
930,303
45
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 9 - Defined Benefit Pension Plan
Plan Description - The City of Livonia Employees' Retirement System (the "System")
is a single -employer defined benefit pension plan that is administered by the City of
Livonia Employees' Retirement System; this plan covers the following employee of the
City unless they elected to transfer to the Citys 401(a) defined contribution pension
plan (see Note 10):
• General employee members - All members hired prior to March 17, 1997 and their
beneficiaries
• Police lieutenant and sergeant members - All members hired prior to December 8,
1997 and their beneficiaries
• Police officer members - All members hired prior to November 24, 1998 and their
beneficiaries
• Firefighter members - All members hired prior to July 1, 1998 and their beneficiaries
The System provides retirement, disability, and death benefits to plan members and
their beneficiaries. At November 30, 2012, the date of the most recent actuarial
valuation, membership consisted of 588 retirees and beneficiaries currently receiving
benefits and terminated employees entitled to benefits but not yet receiving them, and
155 current active employees. The System does not issue a separate financial report.
Contributions - Plan member contributions are recognized in the period in which the
contributions are due. Employer contributions to the plan are recognized when due
and the employer has made a formal commitment to provide the contributions. Benefits
and refunds are recognized when due and payable in accordance with the terms of the
plan. Please referto Note 1 for further significant accounting policies.
The obligation to contribute to and maintain the system for these employees was
established by negotiation with the Citys collective bargaining units and requires a
contribution from the employees from 2.55 percent to 7.30 percent The funding policy
provides for periodic employer contributions at actuarially determined rates.
Administrative costs of the plan are financed through investment earnings.
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 9 - Defined Benefit Pension Plan (Continued)
Annual Pension Cost - For the year ended November 30, 2013, the Citys annual
pension cost of $2,082,220 for the plan was equal to the City's required and actual
contribution. The annual required contribution was determined as part of an actuarial
valuation at November 30, 2011 using the aggregate cost method. Significant actuarial
assumptions used include (a) an 8 percent rate of return and (b) projected salary
increases of 4 percent to 11.92 percent per year. Both (a) and (b) include an inflation
component of4 percent. The actuarial value of assets was determined using techniques
that smooth the effects of short-term volatility over a five-year period. The unfunded
actuarial liability is being amortized as a level percentage of payroll on a closed basis.
The remaining amortization period is the expected future working lifetime. The
pension cost for the three most recent years is as follows:
Fiscal Year Ended November 30
2013 2012 2011
Annual pension cost (APC) $ 2,082,220 $ 747,119 $ -
Percentage ofAPC contributed 100% 100 % 100
Net pension obligation $ - $ - $ -
Reserves - As of November 30, 2013, the plan's legally required reserves have been
fully funded as follows:
Legally required reserves:
Reserve for employees' contributions $ 10,610,082
Reserve for retired benefit payments 49,390,520
Additional reserves- Reserve for employer contributions 158,367,169
Total reserves $ 218,367,771
Note 10 - Defined Contribution Pension Plan
The City established a defined contribution pension plan under Section 401(a) of the
Internal Revenue Code for the following employees:
• General employee members - All members hired on or after March 17, 1997
• Police lieutenant and sergeant members - All members hired on or after
December 8, 1997
• Police officer members - All members hired on or after November 24, 1998
• Firefighter members - All members hired on or after July 1, 1998
In addition, the plan covers all employees electing to transfer from the Citys defined
benefit pension plan (see Note 9).
47
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 10 - Defined Contribution Pension Plan (Continued)
In a defined contribution plan, benefits depend solely on amounts contributed to the
plan plus investment earnings. As established by the City through collective bargaining
agreements, the City contributes a percentage of employees' earnings as follows:
Employees Tansferringfromlhe New Employees HirA After the
Defiretl Benefit Pension Plan Effective Dales Notm Above
Employer Employee Employer Employee
Contribution Contnbution Contnbution Contribution
General
13%
3.1%to366%
8%
3.1%to366%
Police lieutenants and sergeants
13%
521%
11%
521%
Police
13%
5%
11%
5%
Fire
13%
356%
11%
356%
The employee contribution percentages noted above represent the minimum required
contribution. Employees are permitted to contribute additional amounts up to the
maximum allowed by law.
The Citys contributions for each employee (plus interest allocated to the employees
account) are fully vested after four years of service.
In accordance with the above requirements, the City contributed $2,195,562 during the
current year and employees contributed $784,266.
Note 11 - Other Postemployment Benefits
The City of Livonia Retiree Health and Disability Benefits Plan
Plan Description - Effective November 4, 1998, the City created the City of Livonia
Retiree Health and Disability Benefits Plan (the "VERA'). The plan provides medical and
healthcare benefits, including hospitalization and disability benefits, for the welfare of all
retirees and their spouses and eligible dependents. At November 30, 2012, the date of
the most recent actuarial valuation, merrbership consisted of 511 active participants,
631 retired participants, and 33 inactive vested participants.
Eligibility - Most retirees of the defined benefit pension plan and the defined
contribution pension plan and their beneficiaries and future retirees who complete
10 years or more of credited service are eligible. Effective December 1, 2009, certain
newly hired employees receive a health reimbursement account instead of being eligible
for the VEBA As of November 30, 2012, the plan will provide Health Reimbursement
Savings Accounts (H RSA) to all new hires in lieu of the VEBA medical benefits.
Contributions - Employer contributions to the trust are recognized when due and the
employer has made a formal commitment to provide the contributions. Benefits are
recognized when due and payable in accordance with the terms of the plan.
m
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 11 - Other Postemployment Benefits (Continued)
The obligation to contribute to and maintain the System for these employees was
established by negotiation with certain bargaining units, including general and
administrative employees. These employees are required to make a contribution of 2
percent beginning December 1, 2006. The funding policy provides for periodic
employer contributions at actuarially determined rates. Administrative costs of the plan
are financed through investment earnings.
Funding Progress - For the year ended November 30, 2013, the City has estimated
the cost of providing retiree healthcare benefits through an actuarial valuation as of
November 30, 2011. The valuation computes an annual required contribution which
represents a level of funding that, if paid on an ongoing basis, is projected to cover
normal costs each year and amortize any unfunded actuarial liabilities over a period not
to exceed 30 years. This valuation's computed contribution and actual funding are
summarized as follows:
Annual required contribution (recommended) $
7,078,024
Interest on the prior years net OPEB obligation
189,910
Less adjustment to the annual required contribution
(104,351)
Annual OPEB cost
7,163,583
Contributions to VEBA
(6,443,612)
Increase in net OPEB obligation
719,971
OPEB obligation - Beginning of year
2,373,877
OPEB obligation - End of year $
3,093,848
The annual OPEB costs, the percentage contributed to the plan, and the net OPEB
obligation for the current and two preceding years were as follows:
Percentage
Fiscal Year Annual OPEB OPEB Costs
Net OPEB
Ended Costs Contributed
Obligation
11/30/11 $ 6,685,510 91.3 % $
1,631,490
11/30/12 7,318,583 89.9
2,373,877
11/30/13 7,163,583 89.9
3,093,848
49
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 11 - Other Postemployment Benefits (Continued)
The funding progress of the plan as of the most recent valuation date is as follows (in
000s):
Actuarial
Actuarial
UML as
Actuarial
Value of
A nuxl
Unfunded
Fun@tl Ratio
Covered
Percentage
Valuation
Assets'
Liability
AAL(UML)
(Percent)
Payroll
of Coierecl
Date
(a)
(MIL) (b)
(ba)
(alb)
(c)
Paymll
11/30/10
$ 60,361
$ 153,223
$ 92,862
394%
$ 34,862
2726%
11/30/11
62,491
156,260
93,769
49.9
32,871
2853
11/30/12
65,667
169,363
103,696
388
30,964
3349
- Valuatl using the tv�year'smoolhetl fuming' market value
Actuarial Methods and Assumptions - Actuarial valuations of an ongoing plan involve
estimates of the value of reported amounts and assumptions about the probability of
occurrence of events far into the future. Examples include assumptions about future
employment, mortality, and the healthcare cost trend. Amounts determined regarding
the funded status of the plan and the annual required contributions of the employer are
subject to continual revision as actual results are compared with past expectations and
new estimates are made about the future. The schedule of funding progress, presented
as required supplemental information following the notes to financial statements,
presents multiyear trend information about whether the actuarial value of plan assets is
increasing or decreasing overtime relative to the actuarial accrued liabilities for benefits.
Projections of benefits for financial reporting purposes are based on the substantive plan
(the plan as understood by the employer and the plan members) and include the types
of benefits provided at the time of each valuation and the historical pattern of sharing of
benefit costs between the employer and plan members to that point. The actuarial
methods and assumptions used include techniques that are designed to reduce the
effects of short-term volatility in actuarial accrued liabilities and the actuarial value of
assets, consistent with the long-term perspective of the calculations.
In the November 30, 2012 actuarial valuation, the entry age actuarial cost method was
used. The actuarial assumptions included an 8 percent investment ate of return (net of
administrative expenses), which is a blended ate of the expected long-term investment
returns on plan assets and on the employer's own investments calculated based on the
funded level of the plan at the valuation date, and an annual healthcare cost rate of 6
percent for fiscal year 2013, 5.5 percent for the following year, and 4.75 percent
thereafter. Both rates included a 4 percent inflation assumption. The actuarial value of
assets was determined using techniques that spread the effects of short-term volatility in
the market value of investments over a five-year period. The UAAL is being amortized
as a level percentage of projected payroll on an open basis, over 30 years.
50
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 12 - Pension and Other Employee Benefit Trust Funds
The following are condensed financial statements for the City's defined benefit plan (see
Note 9) and the postemployment healthcare plan (see Note 11). The plans do not issue
separate financial statements.
Statement of Net Position
Cash and investments
Other assets
Liabilities
Net position
Statement of Changes in Net Position
Investment income
Contributions
Benefit payments
Other decreases
Change in Net Position
Note 13 - Deferred Revenue
Employees'
Retirement
System VEBA
$223,914,837 $ 85,501,217
56,976 791,074
5,604,042 3,066,156
$218,367,771 $ 83,226,135
$ 37,533,422
$ 13,999,317
2,524,152
7,049,524
(15,226,472)
(7,164,104)
(1,071,597)
(17,683)
$ 23,759,505
$ 13,867,054
Governmental funds report deferred revenue in connection with receivable for
revenue that is not considered to be available to liquidate liabilities of the current
period. Governmental funds also defer revenue recognition in connection with
resources that have been received but not yet earned. At the end of the current fiscal
year, the various components of deferred revenue are as follows:
Governmental BusinasstWe
Governmental Funds MhvRies Mivilies
Unavailabk Ureametl Total unaon tl Uneame
Property tax, sl a al assessment,
andotherreceivables $ 1725,478 $ - $ 1725,478 $ - $ -
C nnunity recreation center
annual passes - 611,635 611,635 611,635 -
Interest receivable on sewer
connections - - - - 114,375
911 surcharge rownue not
received within 68 dan 312,482 - 312,482 - -
Grant revenue not received
within 68&n 12],87] 12],87]
Total $ 2,165,749 $ 611,635 $ 2,771,384 $ 611,635 $ 114,375
City of Livonia, Michigan
Notes to Financial Statements
November 30, 2013
Note 14 - Upcoming Accounting Pronouncements
In March 2012, the GASB issued Statement No. 65, Items Previously Reported as Assets
and Liabilities, which is required to be implemented for financial statements for periods
beginning after December 15, 2012. Statement No. 65 establishes accounting and
financial reporting standards that reclassify, as deferred outflows and inflows of
resources, certain items that were previously reported as assets and liabilities. This
statement also provides other financial reporting guidance related to the impact of the
financial statement elements deferred outflows of resources and deferred inflows of
resources. Statement No. 65 will be implemented for the City during the 2013-2014
fiscal year.
In June 2012, the GASB issued two new pension standards, GASB Statement No. 67,
Financial Reporting for Pension Plans, and No. 68, Accounting and Financial Reporting for
Pensions. These new standards significantly revise the current accounting and reporting
for pensions, both from an employer perspective as well as from a plan perspective.
Employers providing defined benefit pensions to its employees must now, under these
new standards, recognize their unfunded pension benefit obligation as a liability for the
first time and to more comprehensively and comparably measure the annual costs of
pension benefits. This net pension liability that will be recorded on the government -
wide, proprietary, and discretely presented component units statements will be
computed differently than the current unfunded actuarial accrued liability, using specific
parameters set forth by the GASB. The statement also enhances accountability and
transparency through revised and expanded note disclosures and required supplemental
information (RSI). Statement No. 67 is required to be adopted for the year ending
November 30, 2014 and Statement No. 68 one year later.
Note 15 - Contingent Liabilities
Sanitation System Overflow - In spring 2011, the City experienced a 100 -year rain
event. In connection with this event, certain properties in Livonia experienced flooding
and approximately 1,000 residents filed claims against the City for flood damage. The
City has been served with a class action lawsuit for those daims. The City believes it has
governmental immunity from such daims as there was no sewer system defect that
would eliminate this immunity. As such, no estimated liability has been recorded related
to this event.
52
Required Supplemental Information
53
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - General Fund
Year Ended November 30, 2013
Expenditures
Vanancewith
General Government
Original Budget
Final Budget
Actual
Final matter
Revenue
Property Taxes
$ 31,199,536
$ 31199536 $
30,746,396
$ (453,140)
Licenses and Permits
500,186
522,686
522,569
37
Business
129,000
Mudd
166,744
37,744
Nonbusiness
1,492,200
1492200
1817,115
324,915
Total licenses and permits
1,621200
1,621,200
1 963,859
362,659
Intergovernmental Revenue
362,981
382961
389,131
(6,150)
Stale and local
8,011114
8,011114
8,106,692
95,578
Federal
111,000
111,000
225,097
114,097
Total intergoiemmental revenue
8,122,114
8,122,114
8,331 789
209,675
Charges for Services
3,928,832
3928,832
4,156,372
227,540
I merest and Rents
2,412,797
2,412,797
2,434,168
21,371
Fines and Forfeitures
3,539,000
3,479,000
4,156,967
6]7,96]
Miscellaneous Revenue
Sale offered assets
50,000
50,000
41,061
(8,939)
Other miscellaneous
1377,457
137]457
784,811
(592,646)
Total miscellaneous revenue
1,427,457
1427457
825,872
(601,585)
Total revenue
$ 52250,936
$ 52,190,936 $
52,635,423
$ 444,197
Expenditures
General Government
Legislative
City Couml
$ Wl'8d% $
331,855 $
315,356 $
16,499
City aerk
500,186
522,686
522,569
37
Elections
263,454
240,954
156,533
84,421
Total bmelative
1,895,415
1895,415
994458
100,957
Judicial
3,140,618
3,080,618
3,104,077
(23,459)
Executive-Ivlsyors ofice
362,981
382961
389,131
(6,150)
Human resources:
Laborielations
96,500
92888
30,535
62,265
Civil service
580,573
686901
688,811
90
Total human resources
677,073
701,701
639,346
62,355
54
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison
Schedule
- General Fund
(Continued)
Year Ended November
30, 2013
Vanancewith
Original Budget
Final Budget
Pctual
Final Bud3et
apenditures (Continued)
General Gsvernnnent(( nhnned)
Finanaal administration:
Accounting
$ 214,472 $
214472 $
174,542
$ 39,930
Assessing
483,821
483,821
454,949
28,872
Finance
261,820
261,820
259,302
2,518
Independent audt
39,571
39571
39,000
511
Board of Review
5,467
5,467
2,818
2,649
Treasurer
509,811
509,811
467,042
42,769
Information systems
539,178
539,178
504,174
35,004
Total finanaal administration
2,054,140
2,054,140
1901827
152,313
other acbvaies:
Legal
693,890
693,890
561,612
132,218
Utildies and supplies
603,412
603,412
412,168
130,644
Acquisibon of laud
3,000
1,500
-
1,500
Dues and subscriptions
39,000
40,500
40,041
453
Total other octanes
1339,302
1,339,302
1814,421
264,815
Total general government
8,689,529
8,654,151
8,103,266
550,891
Public Salety
Police:
Traffic bureau
1210,669
1108,669
1108,239
430
Administration
2,230,519
2,433534
2,433,211
263
Data processing
731,095
528,095
521,395
100
Detective Bureau
2,494,412
2,463,412
2,462,128
684
Automobve service
561,000
553,000
552,985
15
Communicetrons/Records Bureau
129,295
616,295
616,060
235
Crossingguards
60,984
56,984
56,831
141
School liaison
393,185
31],185
316,344
841
Office of emergency preparedness
103,906
151,283
156,194
489
Reserve police
313,411
306,967
306,911
56
Patrol bureau
11,458,628
10,528,120
10,681,232
(159,112)
Intelligence bureau
1984,366
1851,368
1856,901
467
Total police
22,211540
21,046,912
21201,691
(154,185)
Fire:
ABninistration
894,111
892,1]1
882,599
10,112
Firefighbng
11229,953
12,429,953
12,409,191
20,156
Fire prevention
552,020
554,020
553,103
911
Total fire
12,676,144
13,816,144
13845,499
31245
55
City of Livonia, Michigan
Cultural:
Required Supplemental Information
Budgetary Comparison Schedule
- General Fund
(Continued)
Senior services
443,449
Year Ended November
30, 2013
379
Gmenmead and cultural
692,156
691656
Vanancewilh
48,364
Onginal Buciget
Final Budget
Actual
Final Budget
apendituma(Continued)
Total parks and recreation and cultural
1,541,701
1541]01
1491,607
Public Safety (Continued)
Community and Economic DevelopmerR
Protective inspection:
City Planning Commission
518,305
518,305
485,808
Building Onda Board of Appeals
$ 1,080 $
Two $
118
$ 962
Inspection
1,127,203
1127,203
1894,886
32,317
Total protective inspection
1,128,283
1128,283
1995,004
33,279
Other pmtective- Tmficcommission
2,088
2,088
1817
271
Total Public safety
36,078,655
36,054,027
36,144,017
(89,990)
Public Works
Public services - Highways, streets, and
maintunance:
Engineenng
157,332
116907
103,960
12,947
Parks maintunance
1,361,634
1,361,634
1302,4]]
59,157
Administration
4,831
78,256
]],932
324
Eclopment maintenance
(151105)
(111105)
(1 69339)
58,234
Building maintunance
1,003,892
1,M892
18]],300
592
Sheet lighting
337,416
405,416
297,534
107,882
Maintenance:
Streets
261,131
46,131
33,244
12,887
Traffic sermons
21,430
21430
13,037
8393
Forestry
16,291
16,291
1,736
14,555
Total Pudic works
3,012,852
3,012,852
2,]3],881
2]4,9]1
Parks and Recreation and Cultural
Parks and recreation:
Adininishation
275,128
303,128
302,501
627
Recreation facildies
33,708
24,708
24,292
416
Recreation atuk:tics
97,260
78,260
]],952
308
Total parks and recreation
406,096
406,096
404,745
1,351
Cultural:
Senior services
443,449
443949
443,570
379
Gmenmead and cultural
692,156
691656
643,292
48,364
Total cultural
1,135,60.5
1135,605
1886,862
48,743
Total parks and recreation and cultural
1,541,701
1541]01
1491,607
50,894
Community and Economic DevelopmerR
City Planning Commission
518,305
518,305
485,808
32,497
Zoning Board of Appeals
53,038
53838
39,909
13,129
Total community and economic
development
571343
571343
525,]1]
45,626
Employee Benefits, Insurance, and Other
2,394,618
2394,618
2,13],23]
257,381
Total ex ndiwos $ 52,288,898 $ 52,228,898 $ 51,139,725 $ 1,088,9]3
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - Major Special Revenue Funds
Community Recreation
Year Ended November 30, 2013
Revenue
Property taxes
State -shared nown re and grants
Charges far services
Interest
Miscellanrous rein re
Total revenue
Expenditures
Recreation and wlWre
Tanskrsoul
TolalexpeudRures
Net Change in Fund Balance
Fund Balance - Beginning of }ear
Fund Balance- End of year
Varianww4h
Ameudetl Annencied
Onginal Budjel Budget Achral BuMat
$ 3,043,084 $
3,04$084 $
3,006,519 $
(36,565)
-
321,886
534,525
212,639
3,942,700
3,942,700
4,102,710
160,010
20,000
20,000
4,253
(15,747)
75,700
75,700
84,425
8,725
7,081,484 7,483,370 7,732,432 329,062
4,768,596
5,318,533
4,675,498
643835
2,669,951
2,669,951
2,669,951
$ 3,103,247
7,438,547
7,988,484
7,345,449
643835
(357,063) (585,114) 386,963 972,097
3,46310
3,46310
3,46310
$ 3,103,247
$
2,875,196
$
3,817,293
$
9YL,097
57
City of Livonia, Michigan
Required Supplemental Information
Budgetary Comparison Schedule - Major Special Revenue Funds
Refuse Disposal System
Year Ended November 30, 2013
58
Vanancew4h
Am ndetl
Anna W
Onginal Budjel
BWWt
&Mal
Budget
Revenue
PmNrty taxes
$ 11,13],85] $
11,13],85] $
10,913,884
$ (163,973)
Charges far services
135,500
135,500
170,819
35,319
Interest
25,000
25,000
-
(25,000)
Mis iiannus revenue
25,000
25,000
10,512
(14,428)
Total revenue
11323,351
11323,351
11155,215
(166,082)
E aenditunas- Sandabon
11906,011
11,921,507
11649,561
211926
Net Change in Fund Balance
(582,654)
(596,150)
(494,306)
103,844
Fund Balance- Beginning of year
3,348,91]
3,348,91]
3,348,91]
Fund Balance -End of year
$ 2,766,323 $
2,]58,82] $
2,854,6]1
$ 10.1.894
58
City of Livonia, Michigan
Required Supplemental Information
Pension System
Schedule of Funding Progress
Year Ended November 30, 2013
The schedule of funding progress is as follows (000s omitted):
Valued using the five-}ear"smoothing funding' market value
Schedule of Employer Contributions
Murarial Valuation
Actuanal
Percentage
Fiscal Year Ensued
Date
Contribution
Contnbutetl
Actuanal
A nuod
$ 392,639
100
11/30N4
UAAL as a
-
Value of
Liadlity(AAD
Unfunsuktl
Funded Ratio
Cesered
Percentage of
Actuanal
Assets'
Entry Age
AAL(UAAD
(Percent)
Payroll
Levered
Valuation Date
(a)
(b)
(ba)
(alb)
(c)
Payroll
11/30/07
$ 215,675
$ 173,486
$ (42,189)
1243 % $
15,657
(2695)96
11/30/08
210,519
179,096
(31,423)
1175
16,055
(1957)
11/30/09
207,959
190,134
(17,825)
1094
15,8%
(1124)
11/30/10
203,934
195,105
(8,829)
1045
13,800
(640)
11/30/11
194,515
196,420
1,906
990
12,455
153
11/30/12
186,245
200,224
13,979
930
11,282
1239
Valued using the five-}ear"smoothing funding' market value
Schedule of Employer Contributions
The schedule of funding progress presented above was determined as part of the actuarial
valuations at the dates indicated. Additional information as of November 30, 2012, the latest
actuarial valuation, is as follows:
Actuarial cost method
Murarial Valuation
Annual Regiiretl
Percentage
Fiscal Year Ensued
Date
Contribution
Contnbutetl
11/30N3
11/30/01
$ 392,639
100
11/30N4
11/30/02
-
100
11/30N5
11/30/03
-
100
11/30N6
11/30/04
-
100
11/30W
11/30/05
-
100
11130N8
11/30/06
-
100
11/30N9
11/30/07
-
100
11/30/10
11/30/06
-
100
11/30/11
11/30/09
-
100
11/30/12
11/30/10
]4],119
100
11/30/13
11/30/11
2,082,220
100
The schedule of funding progress presented above was determined as part of the actuarial
valuations at the dates indicated. Additional information as of November 30, 2012, the latest
actuarial valuation, is as follows:
Actuarial cost method
Aggregate (employer contribution) entry age
normal (schedule of funding progress)
Amortintion method
Level percent- Closed
Remaining amortintion period
Expected future working lifetime
Asset valuation methotl
Five-year smoothed market
Actuarial assumption:
Investment rate of return
8.80%
Projected salary increases - Including inflation at
4.00 percent
4.00%-11.92%
59
City of Livonia, Michigan
Required Supplemental Information
Retiree Health and Disability Benefits Plan
Schedule of Funding Progress
Year Ended November 30, 2013
The schedule of fundi rig progress is as follows (000s omitted):
Valued using the tw-year"smoothing fmWi q'market value
Schedule of Employer Contributions
Aduanal Valuation Annual Required Percentage
Fiscal Year Ended Date Cmhibuton- Contributed"
11138N8 11/38N6 $ 6,218,636 100 %
11/38N9 11/38N7 6,197,363 92
11/38/18 11138N8 6,155,752 92
11/38/11 11/38N9 6,639,853 92
11/38/12 11/38/18 7,259,781 91
11/38/13 11/38/11 7,878,824 91
The require l centribution is expmssealto the aty as a percentage of payroll.
" The laical }ear eiWed November 38, 2889 was the first year of implementation of GASB Statement No. 45. As
such, it was the first }ear the annual required contribution was calculated using the GASB No. 45 regiire l
30-yearamortization. Pmvicuslythe GtyumclMor5Byears.
The information presented above was determined as part of the actuarial valuations at the dates
indicated. Additional information as of November 30, 2012, the latest actuarial valuation, is as
follows:
Amortization method Level percent, open
Remaining amortization period 30 years
Asset valuation method Five-year smoothed market
Actuarial assumptions:
Investment rate of return 8.00
Projected annual premium increase 6% for this year, 5.5% for next year,
and 4.75% thereafter
EM
Actuanal
Aduanal
A¢med
UML as a
Value of
Duality(AAD
Untrn a
Funded Ratio
Covered
Percentage of
Actuanal
Assets'
Entry Age
AAL(DAAD
(Percent)
Paymll
Covered
Valuation Date
(a)
(b)
Mrs)
(alta)
(c)
Paymll
11/38/87
$ 52,882
$ 115,685
$ 62,863
456 % $
35,354
1779%
11/38/88
55,361
122,117
66,756
453
37,483
1785
11/38/89
57,845
137,822
79,97
428
36,981
2163
11/38/18
68,361
153,223
92,862
394
34,862
2726
11/38/11
62,491
156,268
93,769
468
32,871
2853
11/38/12
65,667
169,363
183,696
388
30,964
334.9
Valued using the tw-year"smoothing fmWi q'market value
Schedule of Employer Contributions
Aduanal Valuation Annual Required Percentage
Fiscal Year Ended Date Cmhibuton- Contributed"
11138N8 11/38N6 $ 6,218,636 100 %
11/38N9 11/38N7 6,197,363 92
11/38/18 11138N8 6,155,752 92
11/38/11 11/38N9 6,639,853 92
11/38/12 11/38/18 7,259,781 91
11/38/13 11/38/11 7,878,824 91
The require l centribution is expmssealto the aty as a percentage of payroll.
" The laical }ear eiWed November 38, 2889 was the first year of implementation of GASB Statement No. 45. As
such, it was the first }ear the annual required contribution was calculated using the GASB No. 45 regiire l
30-yearamortization. Pmvicuslythe GtyumclMor5Byears.
The information presented above was determined as part of the actuarial valuations at the dates
indicated. Additional information as of November 30, 2012, the latest actuarial valuation, is as
follows:
Amortization method Level percent, open
Remaining amortization period 30 years
Asset valuation method Five-year smoothed market
Actuarial assumptions:
Investment rate of return 8.00
Projected annual premium increase 6% for this year, 5.5% for next year,
and 4.75% thereafter
EM
City of Livonia, Michigan
Note to Required Supplemental Information
Year Ended November 30, 2013
Reconciliation of Budgeted Amounts to Basic Financial Statements - The budgetary
conpanson schedules for the General and Major Special Revenue Funds are presented on the
same basis of accounting used in preparing the adopted budget. The following is a reconciliation
of the budgetary comparison schedule to the governmental funds (statement of revenue,
expenditures, and changes in fund balances):
Total Total
Revenue Expenditures
General Fund
Amounts per operating statement $ 52,595,423 $ 48,492,799
Operating transfers budgeted as revenue and expenditures 40,060 2,646,926
Amounts per budget statement $ 52,635,423 $ 51,139,725
Total
Expenditures
Community Recreation Fund
Amounts per operating statement $ 4,675,498
Operating transfers budgeted as revenue and expenditures 2,669,951
Amounts per budget statement $ 7.345.449
Budgetary Information - Annual budgets are adopted on a basis consistent with accounting
principles generally accepted in the United States of America for the General Fund and all special
revenue funds except that operating transfers and debt proceeds have been included in the
"revenue' and "expenditures" categories, rather than as "other financing sources (uses)." All
annual appropriations lapse at fiscal year end; encumbrances are not included as expenditures.
During the year, the budget was amended in a legally permissible manner.
The City follows these procedures in establishing the budgetary data reflected in the financial
statements:
1. On or before September 15, the mayor submits to the City Council a proposed operating
budget for the fiscal year commencing the following December 1. The operating budget
includes proposed expenditures and the means offinancing them.
2. Public hearings are conducted to obtain citizen comments.
3. As provided for by the City Charter, not later than November 1, the City Council shall adopt
the budget through the passage ofa budget resolution and transmit the budget to the mayor.
Not later than November 15, the mayor shall either approve or disapprove the adopted
budget, in whole or in part.
City of Livonia, Michigan
Note to Required Supplemental Information (Continued)
Year Ended November 30, 2013
4. The legislative budget is adopted at a functional level for the General Fund and at the fund
level for other governmental and proprietary funds. The budget document presents
information by fund, function, department, and line items. Management may amend the
budget at the detail level within the legislative summary constraints. Appropriations that
exceed the summary budget constraints require City Council approval.
Excess of Expenditures Over Appropriations in Budgeted Funds - During the year, the
General Fund incurred expenditures that were in excess of the amounts budgeted, as follows:
Budget Pchial Variance
Generalgoiemment-Judioal $ 3,888,618 $ 3,184,M $ (23,0.59)
General goiemment-Execubw-MayoYs office 382,981 389,131 (6,158)
Public satety - Police - Patrol bureau 10,528,128 10,687,232 (159,112)
62
Other Supplemental Information
63
City of Livonia, Michigan
v Street Quo wblcsey ndpdmed
Mayr Ssem LomlStede Grans Lgmay Tdepnon DMry commdmnon ronenared
a n
Cap and lrvaLreMe
$ 1 $
1126,m4 $
3 !aFl $
137N4 $
8 TFI $
1145M $
25m125 $
1IlW
Bee num
Taxes
2195
Spmalaavren6
Due Romdda gwernnneran unl5
741 A)!
2fi5,m
182511
-
-
-
olne
6
13),881
582fi
Teal assets
$ 2.105 S1,91
as S
ye,ois S
13]A34 S
ffi 7N S1.167]5a
S
ZW2106 S1}11,in
Dabnmmand Fund eamreen
Dabnmea
Among payable
$ 1m%m $
ymo $
WM $
- $
TO $
m1w $
12m $
195¢2
Duewdneerdr
-
-
1mMe
-
-
-
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Other Supplemental Information
Combining Balance Sheet
Nonmajor Governmental Funds
November 30, 2013
5pe ll Rmmerid: Gm15ewu oda ouol npemwim
rmnclwl Taal
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Trai Sg lh 84undim Rau ig and Gl r Cacti w InP "l InP "l 0.eawen8 Imprwerte Fw s
$ 58,M $ 1418415 $ - $ - $ - $ - $ 455,581 $ 488,318 $ M5 $ X294 $171MM
135 2492 - - - - - - - W49fi
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$ 662,195 $1,M a $ S S S S 45fi.381 54,891}18 S ijO,714 S 891.994 $19,MM7
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$ 662,195 $I p$ a $ S S S S 455,w4 $ M9Z3a8 S1,2a,214 S M,, $19,m,392
65
City of Livonia, Michigan
Sp®m Reveruewnda
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Other Supplemental Information
Combining Statement of Revenue, Expenditures, and Changes in
Fund Balances
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69
City of Livonia, Michigan
Other Supplemental Information
Combining Statement of Changes in Fiduciary Net Position
Fiduciary Funds
Year Ended November 30, 2013
Additions
Investr lent imeme (loss):
Interest and dividends
Net change in fair value of investments
Less investment related expenses
Net investr lent imeme
C Mfl mons:
Employer
Empbyee
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Total additions - Net
Deductions
Pension benefit payments
Medrol profit payments
Refunds of mntnbu0ons
Administrative expenses
Totaldeductions
Net Increase
Net Position Held in Trust for Pension and Other
Employee Benefits- Beginning of year
Net Position Held in Trust for Pension and Other
Employee Benefits- End of year
70
Employees'
Retirement
System WBA Total
$ 5,616365 $
1730,607 $
7,340,972
32p51313
12,486,193
44857,586
(528,256)
(137,483)
(665,739)
37,533,422
13,999,317
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6525,832
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5573,676
40,65574
21048,841
61106,415
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-
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7,164,104
860,931
-
860,931
210,666
17,683
228,349
16,298,069
7,181787
23,479,856
23,759,505
13867,054
37,626,559
194608,266 69359,081 263967,347
$ 218,W,M $ W,226,IW $ J81,59J,986
City of Livonia, Michigan
Report to the City Council
November 30, 2013
City of Livonia, Michigan
Contents
Introduction
1
Section 1 -Communications Required Under AU 260
2-6
Section II - Other Recommendations and Related Information
7-11
Section III - Legislative and Informational Items
12-19
Attachment 1 20
April 3, 2014
To the Mayor and Members of the City Council
City of Livonia, Michigan
We have audited the financial statements of the Gty of Livonia, Michigan (the "City') as of and
for the year ended November 30, 2013 and have issued our report thereon dated April 3, 2014.
Professional standards require that we provide you with the following information related to our
audit which is divided into the following sections:
Section I - Communications Required Under AU 260
Section 11- Other Recommendations and Related Information
Section III - Legislative and Informational Items
Section I includes information that current auditing standards require independent auditors to
communicate to those individuals charged with governance. We will report this information
annually to the City Council of the City of Livonia.
Section 11 presents recommendations related to internal control, procedures, and other matters
noted during our current year audit. These comments are offered in the interest of helping the
City in its efforts toward continuous improvement, not just in the areas of internal control and
accounting procedures, but also in operational or administrative efficiency and effectiveness.
Section III contains updated legislative and informational items that we believe will be of interest
to you.
We would like to take this opportunity to thank the City's staff for the cooperation and courtesy
extended to us during our audit. Their assistance and professionalism are invaluable.
This report is intended solely for the use of the City Council and management of the City and is
not intended to be and should not be used by anyone other than these specified parties.
We welcome any questions you may have regarding the following communications and we
would be willing to discuss any of these or other questions that you might have at your
convenience.
Very truly yours,
Plante & Moran, PLLC
Frank W. Audia
Maw -
Marie L. Stiegel
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
Section I - Communications Required Under AU 260
Our Resoonsibilitv Under U.S. Generally Accented Auditina Standards
As stated in our engagement letter dated October 21, 2013, our responsibility, as described by
professional standards, is to express an opinion about whether the financial statements prepared
by management with your oversight are fairly presented, in all material respects, in conformity
with U.S. generally accepted accounting principles. Our audit of the financial statements does
not relieve you or management of your responsibilities. Our responsibility is to plan and
perform the audit to obtain reasonable, but not absolute, assurance that the financial statements
are free of material misstatement
As part of our audit, we considered the internal control of the City. Such considerations were
solely for the purpose of determining our audit procedures and not to provide any assurance
concerning such internal control.
We are responsible for communicating significant matters related to the audit that are, in our
professional judgment, relevant to your responsibilities in overseeing the financial reporting
process. However, we are not required to design procedures specifically to identify such
matters.
Our audit of the City's financial statements has also been conducted in accordance with
Government Auditing Standards, issued by the Comptroller General of the United States. Under
Government Auditing Standards, we are obligated to communicate certain matters that come to
our attention related to our audit to those responsible for the governance of the City, including
compliance with certain provisions of laws, regulations, contracts, grant agreements, certain
instances of error or fraud, illegal acts applicable to government agencies, and significant
deficiencies in internal control that we identify during our audit. Toward this end, we issued a
separate letter dated April 3, 2014 regarding our consideration of the City's internal control over
financial reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements.
Planned Scope and Timing of the Audit
We performed the audit according to the planned scope and timing previously communicated to
you in our letter regarding planning matters dated January 17, 2014.
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
Significant Audit Findings
Quafitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. In
accordance with the terms of our engagement letter, we will advise management about the
appropriateness of accounting policies and their application. The significant accounting policies
used by the City are described in Note 1 to the financial statements. No new accounting
policies were adopted and the application of existing policies was not changed during 2013
except for the implementation of GASB No. 63, Financial Reporting of Deferred Outflows of
Resoumes, Deferred Inflows of Rewurtes, and Net Positron, and GASB No. 61, The Financial
Reporting Entity, Omnibus. There were no significant changes as a result of the implementation
of GASB No. 63 other than a terminology change in the financial statements from net assets to
net position. In accordance with GASB No. 61, the City included the 16t District Court as a
blended component unit and reported their agency funds in the financial statements. The
activity within these funds did not represent a material change to the financial statements.
Management also evaluated the applicability of GASB No. 60, Accounting and Financial Reporting
for Service Concession Arrangements. Based on the construct of agreements involving City
facilities operated by third parties, none were deemed to meet the definition of service
concession arrangements.
We noted no transactions entered into by the City during the year for which there is a lack of
authoritative guidance or consensus.
There are no significant transactions that have been recognized in the financial statements in a
different period than when the transaction occurred.
Accounting estimates are an integral part of the financial statements prepared by management
and are based on management's knowledge and experience about past and current events and
assumptions about future events. Certain accounting estimates are particularly sensitive because
of their significance to the financial statements and because of the possibility that future events
affecting them may differ significantly from those expected. The most sensitive estimates
affecting the financial statements are as follows:
• Incurred but not reported amounts related to the City's self-insured medical claims,
workers' compensation, and general liability
• Unbilled water and sewer receivables
• The collectibility of any delinquent receivables, including property taxes and utility billing
• The landfill closure and postclosure liability
• The liability related to pending property tax appeals
• In the Employees' Retirement System, the value of the SAS equity real estate investment
trust (the "REIT") managed by the Seminole Companies as well as the Seminole Funding
Resources, LLC loan participation agreement
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
• The estimate of chargebacks from Wayne County for delinquent real property taxa
previously purchased from the City
• Reporting of flood damage claims
• Relationship of water and sewer units billed to units purchased
Management's estimate of the various incurred but not reported amounts and unbilled water
and sewer receivables is based on historical information. The property tax appeals liability is
calculated by the City's legal department in conjunction with assessing. All delinquent
receivables are considered collectible by the City finance department based on past history. As
such, no allowances for uncollectible amounts have been recorded. The landfill liability is
calculated by the City's engineering department. We evaluated the key factors and assumptions
used to develop the estimates in determining that they are reasonable in relation to the financial
statements taken as a whole.
Management has reported the SAS equity real estate investment trust at an amount provided by
the Seminole Companies. We obtained audited financial statements for the investment fund
itself as of December 31, 2012 and performed various procedures to evaluate the calculations
and assumptions used by REIT management for the unaudited quarterly reports and member
equity statements received since the date of the audit. We also performed limited analytical
procedures on the revenue and expenses reported by REIT from January 1, 2013 to
November30, 2013. Management has reported the Seminole Funding Resources, LLC loan
participation agreement based on the value of loan funding provided to date. We obtained the
agreement and reviewed the payments as well as the repayment schedule in determining the
appropriateness ofthe amount recorded. We performed these procedures on the data used by
management to develop the estimate to determine that it is reasonable in relation to the
financial statements taken as a whole.
Management has not recorded an estimated liability related to any potential property tax
chargebacks for delinquent real property taxes purchased from the City by Wayne County,
Michigan as the City estimates any potential liability to be inconsequential. We reviewed the
Citys recent chargeback history from Wayne County and reviewed the history with
management personnel to determine that management's estimate is reasonable in relation to the
financial statements taken as a whole.
Management has not recorded an estimated liability related to the class action lawsuit for flood
damages related to the spring 2011 min event. Management believes that it has governmental
immunity from such claims as there was no sewer system defect that would eliminate this
immunity. We have reviewed this matter with management and the City attorney to determine
that management's estimate is reasonable in relation to the financial statements taken as a
whole.
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
Management has not made any adjustment for water and sewer units purchased during the 12 -
month period ended November 30, 2013. The City's ratio of water and sewer units billed to
units purchased changed significantly in the current year compared to historical trends.
Management believes that the amounts the City has been invoiced for are accurate and that the
Citys contract with its supplier stipulates that due to the fact the billings were actual rather than
estimated meter reads, there is no additional liability to be recorded. We have reviewed this
matter with management, including analysis from the Department of Public Works and the City's
contract with its supplier, to determine that management's estimate is reasonable in relation to
the financial statements taken as a whole.
The disclosures in the financial statements are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and
completing our audit.
Disagreements with Management
For the purpose of this letter, professional standards define a disagreement with management as
a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction,
that could be significant to the financial statements or the auditor's report. We are pleased to
report that no such disagreements arose during the course of our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified
during the audit, other than those that are trivial, and communicate them to the appropriate
level of management. The attached schedule summarizes uncorrected misstatements of the
financial statements. Management has determined that their effects are immaterial, both
individually and in the aggregate, to the financial statements taken as a whole. Management has
corrected all other misstatements.
Significant Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, business conditions affecting the City, and business plans and strategies that
may affect the risks of material misstatement with management each year prior to retention as
the City's auditors. However, these discussions occurred in the normal course of our
professional relationship and our responses were not a condition of our retention.
Management Representations
We have requested certain representations from management that are included in the
management representation letter dated April 3, 2014.
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
Management Consultations with OMerindependent Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion' on certain situations. If a consultation
involves application of an accounting principle to the City's financial statements or a
determination of the type of auditors opinion that may be expressed on those statements, our
professional standards require the consulting accountant to check with us to determine that the
consultant has all the relevant facts. To our knowledge, there were no such consultations with
otheraccountants.
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
Section II - Other Recommendations and Related Information
During our audit, we noted areas where we believe there are opportunities for the City to
further strengthen internal control or to increase operating efficiencies. Our observations on
those areas and other financial matters are presented for your consideration belov:
General Fund
Like other Metro Detroit local governments, the City has experienced General Fund revenue
declines from 2008 to 2011 as a result of significant property tax -related events and changes
caused by the recession that impacted the nation and this region. The City has reacted by
reducing the City's General Fund expenditures during that time period and by also enacting two
new voter -approved millages in 2011. As a result, the City was able to maintain its General
Fund fund balance during this very difficult and continually challenging period for local
governments. For the year ended November 30, 2013, General Fund revenue exceeded
General Fund expenditures by approximately $1.5 million as actual spending in the General Fund
was over $1.1 million less than budget and actual revenue in the General Fund was
approximately $445,000 greater than budget.
This result, along with actions taken previously, is very important to preserving the financial
health of the City's General Fund. While the overall economy is improving as reflected by lower
unemployment and increased home sale activity, these trends do not directly translate into
better financial times for Michigan local units of government and the City of Livonia. Even when
property values begin to rise, it will likely take many years for taxable value to return to its
historical peak as growth on existing property is limited by the State's Constitution to the lesser
of inflation or 5 percent. Given the overriding challenges that exist with the Michigan municipal
finance model at a macro level which we have discussed a number of times with the City, we
continue to encourage all of our governmental dients, including the City of Livonia, to consider
these structural limitations as part of its annual budget process.
Plymouth Road Development Authority
The economic collapse of several years ago and the declining property values also negatively
impacted the fiscal health of the Plymouth Road Development Authority (PRDA). The recent
enactment of a 2 mill property tax levy on PRDA property (which was levied in 2013) rased
approximately $882,000 in property tax revenue for the year ended November 30, 2013. This
new millage has currently prevented the General Fund from becoming responsible for payments
on the remaining $2.625 million of debt service related to the 2006 Downtown Development
Refunding Bond issue.
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
Street Funding
The renewal of the road improvement millage in August 2012 has allowed the City to stabilize
the fund balance of its road funds (Major Streets, Local Streets, and Roads and Sidewalks Funds).
Between 2006 and 2012, the combined fund balance of the three funds declined from
approximately $5.5 million to $3.2 million (while annual spending in 2006 was $10.4 million
versus $9.4 million in 2012). The fund balance of these three funds increased in 2013 to $4.6
million. The State of Michigan's challenges with road funding are well documented. The level of
Act 51 monies from the State of Michigan has not kept pace with the needs of the State's
infrastructure system. Even with the Citys dedicated rrillage, it will remain a challenge to
continue to maintain and improve the City's road system.
Refuse Disposal System Fund
This year, the Refuse Fund incurred an anticipated revenue shortfall of nearly $495,000 despite
raising the dedicated refuse and recycling millages from 2.3746 mills to 2.8746 mills, leaving only
0.15 mills left before reaching the maximum allowable millage levy of 3.0246. As a result, fund
balance was reduced to approximately $2.9 million. This is the fourth consecutive year the
Refuse Disposal System Fund has incurred an operating deficit. We are aware that the City's
2013-2014 budget raised the dedicated refuse and recycling millages to 3.0246 mills for 2014,
the maximum allowable millage levy. It is possible that the interaction of the Headlee
Amendment and Proposal A could reduce the maximum allowable millage even further in the
future. We encourage the City to continue to monitor the financial condition of this fund.
Pension Funding
In fiscal year 2012, the City was required to make its first contribution to the defined benefit
pension plan since 2003. Fiscal year 2013 also required a contribution to the defined benefit
pension plan. The Employees' Retirement System recognized contributions from the City
totaling $747,119 in 2012 and $2,082,220 in 2013. During fiscal year 2014, the required
contribution will be approximately $4.1 million. There are a variety of factors that impact the
calculation and estimates made by the City's actuary, including investment performance, life
expectancy, number of retirees, etc. In the most recent valuation dated November 30, 2012,
according to theactuary, the system's funding remained below 100 percent.
Water and Sewer Fund
Based on our testing of the City's utility billing system data for the year ended November 30,
2013, units of water sold in fiscal year 2013 are down approximately 13 percent from 2012 as
opposed to a 12 percent increase from 2011 to 2012. Despite the reduction in units sold, the
City's Water and Sewer Fund reported an operating income and income before capital
contributed from developers and grants after having reported losses for the previous four
consecutive years.
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
The Water and Sewer Fund revenue bonds include several covenants, including a requirement
to maintain a debt service coverage ratio of at least 100 percent on a prospective basis. This
means that the City must set its customer rates such that the City plans to generate sufficient
revenue to pay for the required debt service in addition to the normal operating costs of the
system, such as purchases of service from DWSD and Wayne County, employee compensation,
and other operational costs. Using realistic assumptions of future activity, the City's budget for
the Water and Sewer Fund does, in fact, plan to cover all necessary costs.
As part of last year's audit, we recommended that certain practices and policies concerning
water and sewer billing, including the waiving of interest and penalties, be formalized. This was
completed during fiscal year 2013.
Retiree Health Care
The City has been actuarially funding the growing liability associated with postemployment
health care for many years, ahead of the accounting standards and, as a result, has been able to
accumulate as of November 30, 2013 approximately $83 million for these costs. According to
the most recent actuarial valuation (November 30, 2012), the plan is approximately 39 percent
funded.
While the City has been completing these actuarial valuations and making an annual contribution
for many years, the VEBA plan has used an amortization period (40 years) that is somewhat
longer than what is allowed under the new standards (30 years). Using this longer period has
resulted in the City's contributions being less than the actuarially calculated annual required
contribution (ARC) under the new standards. As a result, since the adoption of GASB Statement
No. 45 in 2009, the City is required to record a liability for the difference between the ARC and
what the City actually contributes to the VEBA. As of November 30, 2013, that liability is now
over $129,000 in the Water and Sewer Fund and approximately $3.0 million in the government -
wide financial statements.
Michigan's Public Pension Systems - Impact of PA 347 of 2012
In December 2012, Governor Rick Snyder signed Public Act 347 of 2012 into law. This
legislation makes some significant changes that will impact all public retirement systems in
Michigan. Amending Public Act 314 of 1965, these new rules are meant to provide greater
flexibility to these systems as to how funds are invested while at the same time imposing
additional requirements aimed at transparency and accountability. These changes, which went
into effect in March 2013, are summarized below:
Changes to Allowable Investment Vehicles
Generally, rather than making it more restrictive, the new rules raise the maximums for several
investment categories, such as real estate and global equities. As an example, the limitations
within the "basket clause" are increasing by 10 percentage points, with most plans now allowed
to invest between 15 percent and 20 percent within this section, depending upon plan size.
Monitoring under these new limitations will continue to be important. Toward this end, plans
will need to ensure their investment consultants, advisors, and managers are "on board" with the
charges.
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
Spending Limitations
This act would limit the amount of spending on professional training, education, and travel.
Under the legislation, the retirement system's board of trustees would be required to adopt an
annual budget for professional training and education, including travel. This budget will be
capped at the lesser of $150,000 or an amount equal to $12,000 multiplied by the number of
board members, with professional training, education, and travel costs not to exceed $30,000
for any one board member.
Additional Documentation and Reporting Requirements
Additional transparency reporting requirements for retirement systems, investment fiduciaries,
and investment service providers are being imposed by this new public act. First, the legislation
would require the publication by the plan of a summary annual report (SAR). Although similar
reporting requirements exist in the old legislation, this act requires more detailed reporting than
what we are used to.
The SAR would include several additional disclosures, including the following: names of
investment service providers, the system's itemized budget (including professional training,
education, and travel), disclosure of the systems investment returns, and numerous pieces of
information from the systems most recent annual actuarial valuation report. The system is
required to make its SAR available to plan participants and citizens via posting to its website if
the system has a website or, alternatively, would require the plan sponsor to post i[ to their
website.
In addition, investment service providers are now required to give the investment fiduciary a
complete written disclosure of all fees or other compensation associated with its relationship
with the retirement system. This disclosure would be required both before providing any
investment services as well as on an annual ongoing basis. Finally, financial records of the system
must be retained fora minimum six-year period.
The City's Retirement System and Retiree Health and Disability Benefits Plan System are
required under Public Act 347 of 2012 to adopt an annual budget for professional training and
education, which has not yet been completed. In addition, the systems currently prepare an
annual summary, however, not all of the information required under Public Act 347 was
included, nor was the summary made available on the system: websites. Currently, the
summary is included in the City's annual report on the website; however, i[ should be a stand-
alone item. The systems are working toward becoming compliant with these requirements.
There was no financial impact as a result of this noncompliance.
10
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
New Accounting and Auditing Standards
The Governmental Accounting Standards Board has released a number of additional statements
that will become effective for the City over the next several fiscal years. A beef explanation for
each of these new statements has been included in Note 14 of the City's financial statements.
As we have in the past, we will provide the City the support necessary to implement these new
standards.
GASB Statement No. 67, Financial Reporting for Pension Plans, and No. 68, Accounting and
Financial Reporting for Pensions, significantly revise the current accounting and reporting for
pensions, both from an employer perspective as well as from a plan perspective. Employers
providing defined benefit pensions to its employees must now, under these new standards,
recognize their unfunded pension benefit obligation as a liability for the first time and to more
comprehensively and comparably measure the annual costs of pension benefits. This net pension
liability that will be recorded on the government -wide, proprietary, and discretely presented
component units statements will be computed differently than the current unfunded actuarial
accrued liability, using specific parameters set forth by the GASB.
It will be imperative that the City and the Retirement System coordinate with the actuary early
on in the process of implementation of these standards to determine a measurement date, agree
on a timeframe to receive the needed information from the actuary, agree on any new
information that will be needed from the actuary, and ensure the appropriate assumptions are
being used. We have a large amount of information available on this topic including webinars,
workaids, and checklists that we will provide the City and the Retirement System to assist with
this process.
11
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
Section III - Legislative and Informational Items
Revenue Sharing
The State's FY 2013-2014 budget agreement brought forth many changes to each of the three
categories with the most dramatic change to the newly titled Category 3: Unfunded Accrued
Liability Plan. Category 3 is the only remaining deadline for the 2013-2014 State budget year.
Below are the new requirements for Category 3:
Category 3 - Unfunded Accrued Liability Plan (UALP)- Due Date 6/1/2014
If the most recent audited financial report includes unfunded accrued liabilities for
employee pensions or other postemployment benefits, a plan to lower all unfunded
accrued liabilities must be completed with the following elements:
• Listing of all previous actions taken to reduce unfunded accrued liabilities. This
should include an estimated cost savings.
• Detailed plan of how the previous actions will continue to be implemented and
maintained
• A list of additional actions that could be taken
• In the event that no actions have been taken to reduce the liabilities, an explanation
as to why this is the case and what potential actions could be taken
• Note that any actuarial assumption changes and issuance of debt do not qualify as a
new proposal
• The plan shall be readily available in the derk's office or posted on a publicly
accessible website. In addition, the entity should certify with the Department of
Treasury that the plan is publicly available.
• If there are no unfunded accrued liabilities, the unit must certify to the Department of
Treasury by the deadline and explain why none exist.
Governor Snyder's 2014-2015 Proposed Budget Plans for Revenue Sharing
Governor Snyder's 2014-2015 budget proposal was announced in early February 2014. The
proposed budget calls for increases in both Constitutional revenue sharing and EVIP (Economic
Vitality Incentive Program) payments. The revenue sharing "pot" for 2014-2015 would total
$1.3 billion and would be distributed as follows:
Amount
Description
$764.9 M
Constitutionally required payments
$271.8 M
$169.0M
EVIP
County revenue sharing
$ 42.2 M
County incentive program
$ 5.0M
Competitive grant assistance program
12
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
The figures above represent a 3 percent increase in the Constitutionally required payments and
a 15 percent increase in EVIP. The EVIP provides $243 million for qualified cities, villages, and
townships that adopt best practices plus an additional $28.8 million for supplemental payments
to all qualified local units of government on a population basis, with high -performing and high -
need communities receiving the larger share of the proposed payments.
EVIP Best Practices - There are two best practices "paths' a city, village, or township could
take to meet the requirements under this standard: (1) If a community so chooses, it could
continue to comply with the three existing best practices: accountability and transparency,
consolidation of services, and unfunded accrued liability requirements and (2) Under the new
budget plan, there would be an alternative second option to the existing EVIP best -practices
compliance requirements. A community would have to comply with all four of these new
standards below and certify as such by October 1, 2014:
Best Practices Under Alternative#2
1. Have an unrestricted fund balance equal to or greater than 6 percent of
the most recently adopted General Fund expenditures
2. Make defined benefit pension contributions that are equal to or greater
than the annual required contribution amounts determined by actuarial
valuation or indicate you have no DB pension plans
3. Pre -fund postemployment benefd plans at levels that are equal to or
greater than the annual required contribution amounts determined by the
actuarial valuation or indicate you have no DB -type OPEB plans
4. Have a general obligation bond or credit rating that is at least AA- or the
equivalent of that rating from two out of three rating agencies (Fitch,
Moody's, and S&P)
The remaining $28.8 million of proposed EVIP funding would be used for supplemental
payments to qualified cities, townships, and villages and would be calculated based on population
with entities that meet one or more of the following four criteria receiving a larger share:
1. Meet the new four best practices standards for EVIP
2. Are in the top 25 percent of Michigan communities with populations of at
least 5,000 based on violent crime rates
3. Are in the top 25 percent of Michigan communities with populations of at
least 20,000 based on unemployment rates
4. Have a deficit elimination plan approved by the Department of Treasury
13
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
For each criterion a community meets, its population would be adjusted upwards 10 percent for
the purpose of calculating its total aid. This methodology would increase an eligible community's
overall relative percentage as compared to others and would increase their share of the available
funding. It was stated that this methodology is an attempt to reward the communities that are
adhering to best practices but also to provide some additional funding for challenged
communities.
Counties would continue to receive both CIP (incentive -based payments) and revenue-sharing
payments. Counties would also have the same alternative "best practice" to that outlined above
for cities, townships, and villages. The proposed budget also calls for the 74 eligible counties to
receive the maximum allowed funding under the statutory provisions.
In response to this proposal, there has been talk that the Senate budget version may continue to
appropriate dollars for EVIP but remove the program requirements. The funds budgeted for
EVIP in the Senate proposal would move into the revenue-sharing formula. We will continue to
keep you updated on any significant changes to this proposal.
Personal Property Tax
Significant personal property tax legislation is moving quickly through the Legislature. Key
provisions of the 10 -bill package include:
1. In August 2014, Michigan voters will be asked to approve a shift in use tax dollars to
create a replacement fund. If rejected, the eligible manufacturing exemption described
below will not occur, and the $40,000 Small Taxpayer Exemption under PA 48 of 2012
would be effective for just the 2014 tax year (personal property tax would be levied
again in 2015 for these small businesses).
2. The much talked -about local essential services assessment (ESA) would be replaced with
a State -assessed ESA, which is actually a tax but is being referred to as an assessment
simply so that it is recognized as the substitute for the local ESA. Since this is a new tax,
the vote in August is technically a Headlee vote.
3. The new bills increase the reirrbursement to local units for lost personal property tax
revenue to an amount stated as 100 percent replacement.
Two key provisions under the previous personal property tax reform legislation (PA 408 of
2012) remain:
1. Under PA 408 of 2012, businesses with less than $40,000 of combined industrial and
commercial personal property TV ($80,000 true cash value) would not have to file PPT
returns or pay any personal property tax This provision remains unchanged in these
new bills. This exemption begins with the 2014 tax year (December 31, 2013
assessments).
14
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
2. "Eligible Manufacturing" property would be exempt from PPT. This would be phased in
beginning in 2016 (December 31, 2015 assessment date) with the following provisions:
a. Any property purchased subsequent to December 31, 2012 would be exempt
immediately.
b. Property purchased prior to December 31, 2012 would be reduced to zero by its
10th year of existence (should take nine years).
Reimbursement to Communities
Under these bills, reimbursements to local units of government would occur in several forms:
• Debt Loss - Debt loss is defined as the amount of ad valorem and dedicated taxes that
go toward debt that are lost as a result of the personal property tax exemption. During
FY 2014-2015 and 2015-2016, revenue distributed by the newly created Local
Community Stabilization Authority (LCSA) would equal either a community's debt loss
or, in the case of a TIF, the small taxpayer loss. Through the 2015-2016 fiscal year, the
Imes are limited to the impact of the $40,000 small business exemption. When the
phase-out of Eligible Manufacturing property would begin to occur when tax bilk go out
in 2016, the debt loss (and corresponding reimbursement) will increase.
Nondebt Loss - Nondebt loss is calculated using the lowest rate of each individual
millage levied in the period between 2012 and the year immediately preceding the
current year. This will exclude debt millage. The department will compute the loss by
conparing the current year taxable value of commercial and industrial property to the
taxable value that existed at December 31, 2012 (2013 tax year). In 2016, cities will be
reimbursed for nondebt loss for 2014 and 2015 related to the small taxpayer exemption
loss. This is for cities only. For 2014 and 2015, townships will be getting reimbursed for
the debt loss related to the small business exemption, but not the other losses created by
the small business exemption. Starting in 2016, all municipalities are reimbursed for
nondebt loss.
• Essential Services Reimbursement - Beginning in 2015-2016, the LCSAwould receive
a portion of the State's use tax as well as the full essential services assessments in which
to reirrburse local units. This assessment is set at a prescribed millage rate based on the
acquisition cost of property (depreciation will no longer apply). The ate is set at 2.4
mills for a property's first five years, 1.25 mills for the next five years, and 0.9 mills
thereafter. Essential services are defined as ambulance, fire, and police services as well
as jail operations. This includes the cost of related pension funding.
The losses described by the bill are to be paid in order of this priority: school debt,
Intermediate School District losses, school operations, government essential services,
debt and TIFA forgone increases, and all other reimbursements. In theory, if them is not
enough money available, the lower priority items may not be fully reimbursed.
However, that department has indicated that they expect the fund to have enough to
cover all reimbursements.
15
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
• All Other Reimbursements - These reimbursements would also begin in 2015-2016
and initially be proportional to each local unit's share of total "qualified losses," taking into
account the losses of all municipalities. Over time, the reimbursement will shift to be
based on each entity's share of industrial real property on which exempt eligible
manufacturing personal property is located. Beginning in FY 2017-2018, 5 percent of the
revenue would be distributed proportionally based on each local unit's share of industrial
real property on which exempt personal property is located. The 5 percent portion
would increase in 5 percent increments in each subsequent year. By FY 2036-2037, all
revenue in the last category of reimbursements would be distributed based on the local
unit's share of industrial real property on which exempt eligible manufacturing personal
property was located. In short, in the beginning, the reimbursement is closely tied to the
amount of lost personal property taxes but, over time, the community's reimbursement
will be tied to the level of industrial real property.
Pension Obligation Bonds and Other Postemployment Benefits Obligation Bonds
Michigan Public Act 329 of 2012 was passed on October 17, 2012 with immediate effect. The
act allows communities that meet certain criteria to issue bonds to fund all or a portion of their
unfunded pension and other postemployment benefits (OPEB) liabilities. The bonds are called
pension obligation bonds or other postemployment benefits obligation bonds and are collectively
referred to as' benefit bonds."
These bonds are subject to federal taxation but are tax exempt by the State of Michigan and
must be issued prior to December 31, 2014. The bonds are issued by ordinance or resolution
and do not require a vote of the people.
Municipalities must meet all of the following key requirements (the act also states additional
requirements) in order to be eligible to issue benefd bonds:
• Prior to issuance, the municipality must obtain approval from the State Department
of Treasury. In addition, the municipality must publish a notice of intent to issue the
security.
• Be assigned a credit rating of AA rating or higher by one of the nationally recognized
rating agencies (Standards & Pooes, Moody's, or Fitch)
• The issued security shall be rated investment grade by a nationally recognized rating
agency.
• The property taxes necessary to meet the debt service obligation may not exceed
the limit authorized by law.
• Have a legal capacity to issue the obligation as these bonds are not exempt from legal
debt limitations
16
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
• Relative to the pension plan, have partial or complete cessation of accruals to a
defined benefit plan or closed the defined benefit plan to new or certain existing
employee groups and implemented a defined contribution plan (this requirement
does not apply to the retiree health care or OPEB plan)
• The municipality shall covenant with bond holders and the State that it will not, after
the issuance of benefit bonds and while the bonds are outstanding, rescind any action
taken for the cessation of accruals to a defined benefit plan or complete closure of
defined benefit plans for new and existing employees.
We are aware that the City has worked with its bond counsel and actuary to evaluate the
advantages of this law for the City.
IMP -like Requirements Tied to Act 51 Monies (Public Act 506 of 2012)
A new reporting requirement by MDOT will be due each September 30 starting in 2014. This
requirement is a result of Public Act 506 of 2012 which places EVIP-like limitations on pension
and healthcare benefits paid to transportation employees. For the purposes of this act,
"transportation employee" means an employee paid in whole or in part through Act 51 revenues
or who is engaged in work funded through Act 51 revenues.
The act requires local units receiving Act 51 money for the construction or maintenance of roads
to comply with one of the following conditions by September 30, 2014:
1. Develop and publicize a transportation employee compensation plan that the local
agency intends to implement with any new, modified, or extended employment
contracts or agreements. This compensation plan must include all of the following:
o For new employee hires, the employer contribution toward retirement plans
must be capped at 10 percent of base salary.
o Defined benefit pension plans my use a maximum multiplier of 1.5 percent of
final average compensation if postemployment health care is provided and
2.25 percent if postemployment health care is not provided.
o For defined benefit pension plans, the final average compensation must be
calculated using a minimum of three years of compensation and must not
include more than 240 hours of paid leave. Overtime hours cannot be used in
calculating final average compensation.
o The employer contribution for healthcare coverage for new employee hires is
capped at 80 percent of the employee's premium or must be competitive
with the new state preferred provider organization health plan on a per -
employee basis.
17
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
2. Comply with Public Act 152 of 2011, which requires public employers to place hard
caps on the amounts they contribute toward healthcare costs with an option to elect
an 80 percent contribution cap rather than a hard cap. These hard caps are adjusted
annually for inflation. The caps in 2012 were $5,000 for single coverage, $11,000 for
individual and spousal coverage, and $15,000 for family coverage. See below for a
discussion of Senate Bill 542 that proposes changes to the individual and spousal
coverage limit from $11,000 to $13,455.
3. Certify that the local road agency does not offer medical benefits to its transportation
employees or elected public officials.
If a local unit receiving Act 51 money does not certify that it complies with one of the above
criteria by September 30 of each year, the Department of Transportation may withhold Act 51
distributions until compliance is established.
Act 506 also requires local road agencies to maintain a searchable website (accessible to the
public) that includes the current budget, the number of active transportation employees by job
classification and wage rate, a financial performance dashboard, the names and contact
information ofthe governing body, and a copy of the annual certification provided to MDOT.
For our communities that are already complying with the requirements of Public Act 152 of
2011, we do not expect this new legislation to have a significant impact on operations since it
essentially just creates a new reporting requirement; however, please contact your audit team if
you would like to talk through the details of the act and your community's compliance.
Amendments to Public Act 152 of 2011 (Healthcare Limitations)
On December 11, 2013, legislation was passed (formerly SB 541-545) in an effort to clarify PA
152 of 2011. These amendments are effective immediately. SB 542 and 543 have perhaps the
most direct financial impact on communities.
SB 542 - This bill modified the current law which allows employers to opt between a
percentage -based cap or a dollar-lirrit (hard cap) on employee health insurance premiums. The
bill increases the dollar -cap for individual and spouse coverage from the current limit under
PA 152 of $11,000 to $13,455. This applies for all medical plan coverage years beginning in
calendar year 2014 according to the current language. The $13,455 cap is increased annually for
any changes in medical CPI on an annual basis. Please keep in mind that if your coverage year
began after January 1, 2014, this could have resulted in an unanticipated additional cost of $2,455
per employee. Several communities have questioned this aspect but it does not appear to have
been addressed in the bill.
Currently, PA 152 excludes elected officials from the number of employees in the dollar cap
formula This would no longer be the case; they would become part of that calculation.
f[7
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
SB 543 - This bill applies only to those public employers that adopt the 8020 percentage -based
option. It clarifies that all public employers (excluding the State) have to have support of a 2/3
vote by the governing body prior to the start of each medical benefit plan coverage year. If this
does not occur, the public employer would then have to follow the hard cap requirement.
Occupancy Rate - WPW Case
Legislation has been introduced (Senate Bill 114) that would increase property tax dollars by
preventing permanent reductions in taxable value that would occur under the old act when
occupancy rates declined. Communities have seen the detrimental impact of a tax reduction
loophole created by a Michigan Supreme Court decision in 2002 (WPW Acquisition Company
vs. City of Troy). The prior legislation allowed for an increase and decrease of certain
commercial property's taxable value based on their occupancy rates. This seemed to make
sense as it reflected ups and downs in the market. However, there was a glitch in actually
applying the provisions for an increase. Communities were not being allowed to increase the
value beyond the Proposal A limits of 5 percent or the rate of inflation even when occupancy
significantly increased. Under the newly proposed act, values can increase beyond the
Proposal A limits if a loss had been previously allowed because of a decrease in occupancy rate
or if the value of new construction was reduced because of below-market occupancy rate.
19
To the Mayor and Members of the City Council April 3, 2014
City of Livonia, Michigan
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Federal Awards
Supplemental Information
November 30, 2013
City of Livonia, Michigan
Contents
Independent Auditors Reports:
Report on Schedule of Expenditures of Federal Awards Required by
OMB Circular A-133
1
Report on Internal Control Over Financial Reporting and on Compliance and
Other Matters Based on an Audit of Financial Statements Performed in
Accordance with GovemmentAuditing Standards
2-3
Report on Compliance for Each Major Federal Program;
Report on Internal Control Over Compliance
4-6
Schedule of Expenditures of Federal Awards
7-8
Reconciliation of Basic Financial Statements Federal Revenue with Schedule of
Expenditures of Federal Awards
9
Notes to Schedule of Expenditures of Federal Awards
10.11
Schedule of Findings and Questioned Costs
12-14
Report on Schedule of Expenditures of Federal Awards
Required by OMB Circular A-133
Independent Auditor's Report
To the City Council
City of Livonia, Michigan
We have audited the basic financial statements of the governmental activities, the business -type
activities, the aggregate discretely presented component units, each major fund, and the
aggregate remaining fund information of the City of Livonia, Michigan (the "City') as of and for
the year ended November 30, 2013 and the related notes to the financial statements, which
collectively comprise the Citys basic financial statements. We issued our report thereon dated
April 3, 2014, which contained an unmodified opinion on the basic financial statements of the
governmental activities, the business -type activities, the aggregate discretely presented
component units, each major fund, and the aggregate remaining fund information. Our audit was
conducted for the purpose of forming an opinion on the financial statements that collectively
comprise the basic financial statements. We have not performed any procedures with respect to
the audited basic financial statements subsequent to April 3, 2014.
The accompanying schedule of expenditures of federal awards and reconciliation of financial
statements federal revenue with schedule of expenditures of federal awards are presented for
the purpose of additional analysis as required by U.S. Office of Management and Budget Circular
A-133, Audits of States, Local Governments, and Non -Profit Organizations, and are not a required
part of the basic financial statements. Such information is the responsibility of management and
was derived from and relates directly to the underying accounting and other records used to
prepare the basic financial statements. The information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and certain additional
procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic
financial statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the information is
fairly stated in all material respects in relation to the basic financial statements as a whole.
t 24�1 '04L it
April 3, 2014
Report on Internal Control Over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standard's
Independent Auditor's Report
To Management and the City Council
City of Livonia, Michigan
We have audited, in accordance with auditing standards generally accepted in the United States
of America and the standards applicable to financial audits contained in Government Auditing
Standards issued by the Comptroller General of the United States, the basic financial statements
of the governmental activities, the business -type activities, the aggregate discretely presented
component units, each major fund, and the aggregate remaining fund information of the City of
Livonia, Michigan (the "City') as of and for the year ended November 30, 2013 and the related
notes to the financial statements, which collectively comprise the City's basic financial
statements, and have issued our report thereon dated April 3, 2014.
Internal Control Over Financial Reporting
In planning and performing our audit of the basic financial statements, we considered the City of
Livonia, Michigan's internal control over financial reporting (internal control) to determine the
audit procedures that are appropriate in the circumstances for the purpose of expressing our
opinions on the basic financial statements, but not for the purpose of expressing an opinion on
the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the
effectiveness of the Citys internal control.
Our consideration of internal control was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies; therefore, material weaknesses or significant
deficiencies may exist that were not identified. However, as described in the accompanying
schedule of findings and questioned costs, we identified a certain deficiency in internal control
that we considerto be a material weakness.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent or detect and correct misstatements on a timely bass. A material weakness is a
deficiency, or a combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the entity's financial statements will not be prevented
or detected and corrected on a timely basis. We consider the deficiency described in the
accompanying schedule of findings and questioned costs as Finding 2013-001 to be a material
weakness.
To Management and the City Council
City of Livonia, Michigan
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City of Livonia, Michigan's basic
financial statements are free from material misstatement, we performed tests of its compliance
with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance
with which could have a direct and material effect on the determination of financial statement
amounts. However, providing an opinion on compliance with those provisions was not an
objective of our audit and, accordingly, we do not express such an opinion. The results of our
tests disclosed no instances of noncompliance or other matters that are required to be reported
under Government Auditing Standard's.
City of Livonia, Michigan's Response to Finding
The City of Livonia, Michigan's response to the finding identified in our audit is described in the
accompanying schedule of findings and questioned costs. The City of Livonia, Michigan's
response was not subjected to the auditing procedures applied in the audit of the basic financial
statements and, accordingly, we express no opinion on iL
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of
the City's internal control or on compliance. This report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the City's internal
control and compliance. Accordingly, this communication is not suitable for any other purpose.
AV& 001.4 11
Southfield, Michigan
April 3, 2014
Report on Compliance for Each Major Federal Program;
Report on Internal Control Over Compliance
Independent Auditor's Report
To the City Council
City of Livonia, Michigan
Report on Compliance for Each Major Federal Program
We have audited the Oty of Livonia, Michigan's (the "City") compliance with the types of
compliance requirements described in the U.S. Office of Management and Budget (OMB)
Circular A-133 Compliance Supplement that could have a direct and material effect on each of
its major federal programs for the year ended November 30, 2013. The City of Livonia,
Michigan's major federal programs are identified in the summary of auditors results section of
the accompanying schedule offindings and questioned costs.
Management's Responsibility
Management is responsible forcompliance with the requirements of laws, regulations, contracts,
and grants applicable to each of its federal programs.
Auditors Responsibility
Our responsibility is to express an opinion on compliance for each of the City of Livonia,
Michigan's major federal programs based on our audit of the types of compliance requirements
referred to above.
We conducted our audit of compliance in accordance with auditing standards generally accepted
in the United States of America; the standards applicable to financial audits contained in
Government Auditing Standard's, issued by the Comptroller General of the United States; and
OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Those
standards and OMB Circular A-133 require that we plan and perform the audit to obtain
reasonable assurance about whether noncompliance with the types of compliance requirements
referred to above that could have a direct and material effect on a major federal program
occurred. An audit includes examining, on a test basis, evidence about the City of Livonia,
Michigan's compliance with those requirements and performing such other procedures as we
considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each
major federal program. However, our audit does not provide a legal determination of the City
of Livonia, Michigan's compliance.
To the City Council
City of Livonia, Michigan
Opinion on Each Major Federal Program
In our opinion, the City of Livonia, Michigan complied, in all material respects, with the types of
compliance requirements referred to above that could have a direct and material effect on each
of its major federal programs for the year ended November 30, 2013.
Report on Internal Control Over Compliance
The management of the City of Livonia, Michigan is responsible for establishing and maintaining
effective internal control over compliance with the types of compliance requirements referred
to above. In planning and performing our audit of compliance, we considered the City of Livonia.,
Michigan's internal control over compliance with the types of requirements that could have a
direct and material effect on each major federal program to determine the auditing procedures
that are appropriate in the circumstances for the purpose of expressing an opinion on
compliance for each major federal program and to test and report on internal control over
compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an
opinion on the effectiveness of internal control over compliance. Accordingly, we do not express
an opinion on the effectiveness of the Citys internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in
the preceding paragraph and was not designed to identify all deficiencies in internal control over
compliance that might be significant deficiencies or material weaknesses; therefore, there can be
no assurance that all deficiencies, significant deficiencies, or material weaknesses have been
identified. However, as discussed below, we identified a certain deficiency in internal control
over compliance that we consider to be a material weakness.
A deficiency in internal control over compliance exists when the design or operation of acontrol
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent or detect and correct noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency, or a combination of deficiencies, in internal control over
compliance such that there is a reasonable possibility that material noncompliancewith a type of
compliance requirement of a federal program will not be prevented or detected and corrected
on a timely basis. We consider the deficiency in internal control over compliance described in
the accompanying schedule offndings and questioned costs as Finding 2013-002 to be a material
weakness.
The City of Livonia, Michigan's response to the internal control over compliance finding
identified in our audit is described in the accompanying schedule of findings and questioned costs
and corrective action plan. The City of Livonia, Michigan's response was not subjected to the
auditing procedures applied in the audit of compliance and, accordingly, we express no opinion
on it.
To the City Council
City of Livonia, Michigan
The purpose of this report on internal control over compliance is solely to describe the scope of
our testing of internal control over compliance and the results of that testing based on the
requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other
purpose.
l Aww, PLLC
Southfield, Michigan
April 3, 2014
City of Livonia, Michigan
Schedule of Expenditures of Federal Awards
Year Ended November 30, 2013
See Notes to Schedule of Expenditures
of Federal Awards. 7
Passthrough Edgy
yearn!
Feel
Federal Agencyrass-mroum Aoemymrorammle
CFMNumeer
mediming Number
amt
Exreencitures
US Department o krio,rcure- Earergemy Foodr�sumeamter-
Pasetlthrough the Wayne MctmrmidnCommrvrySeMc¢Pgemy-
Ererg=. FoodA is®nm Prmmm(Fo Co tin)
10566
N/A
$ 55,0.%
$ 55,0.%
US Department ofHoosingandUrban De elopmd:
CDBG Eamemea Grants Closter.
Commnity Development Block Grant:
Programyear20t3-B05MG2688t3
14218
HIM
326,936
t8l
Programyear2012-B05MG268012
14218
HIM
281
291666
Total Community Devel¢nent dockGrant
671,166
Passed through the Morison Slate Honed Deaelopmnt ANhonly
N eiglhnhood 4ladlizatim Progaml
14218
NSP-MUD5068
1'v'BW
M317
Total mac Edmement crams cluster
49a`FU6
Passed through the Mich can Kale Horsier Deaeloonent A8iM8µ
HOMElnvstment PartnershipProgram-Progamyer2W3
142A
M2002-5068
271200
965
Pasetlihrwgh Wayne County- HOME ImsLrenl Partnership
ProgramHomesCmvrtium Funds
142A
HIM
226,BW
16,671
Taal D s. Defamed of Users and
Urban Developnea
571
US Departmentofrodee
mprogaincid er.
Passedmropgh Wayne county
fil 20WEdyard Byme Memrollstice Asi9ase Graf
168m
Halo MI SU
66276
E6371
Mll) Eduard Byrne Memorial torsos Passional
16766
Dle%-1066
13,986
13,986
2011 Edvartle)lure Memorial torsos Passional
lance
Dle%-2481
122M
Taal Pasedthrwgh Wayne County
61$71
Poseu rmgM1 Mkhiwn Slate Pais:
A4RA-2066 Edrartl Byme Menwal lsti<e Frsi9ame Graf
168M
SUH9d017
A,BW
A,BW
M12 Eduard Byrne Memorial torous As¢lame Grad
16138
Dle%-0109
A,BWLBW
Taal Posedthrogh Mdiigan Sae Pi
1 W BW
Taal Yd. ProyainD sten
161$71
Federal Eculatle Starts shoal
16922
N/A
s16E2
s16E2
Dmq Enforcement Atlmnistraion Task Force
16 mdwxn
N/A
1/,738
1/,738
11SMacllsDetroit Furtive ABVehenim Task Force
16ndvxn
N/A
19,10
19,10
Bulletpm(Vest PaMeMipProgram
16666
N/A
1,1061109
Total D 5. DelsNred of "ties
291218
See Notes to Schedule of Expenditures
of Federal Awards. 7
City of Livonia, Michigan
Schedule of Expenditures of Federal Awards (Continued)
Year Ended November 30, 2013
Federal gency/Pasthrough lgenryNrograir le
U s oeradment ofTramfortatim:
Nighway Planning a CmstmQion Custer- Passed through the Michigan
oeraNmem ofTrampontamn- naw.- wghl Planning and
Construction:
Fve Mletolaurel Park Noth
EastkvndWes@'und Schooluat
Total Highway Planning & Cm?mQion Cluster
Highway4kly Cluster- Pavedthrmghthe Michiq OMsof
Highvay S3kly- Slateand Comrtunity Highs Sakty-Bel
Enforcement
Tool us. oeleNmentofTraspoemion
U s Environmental Protection eager
Posetl[r Were Col Congressionally Madded Project
River Rots Natural Wet Weather Project- WM1islenrg Wrlom
River Rots Natural Wet" eather Project- Rennold; Ravine
TotaIUS.Endmnneeddll Protectionski
US oemNment ofHomelandfiammy.
Aiesioncem Firefighters Grant
Pasedthroul the Michigan Captured crSlate force
2011 Erreryency Manaaerrent Perkdrrmnce Grant
Pasedthragh Wayne County- Horreland Securty
Gram Program (Fact
Total US. Geledrrem of HorrelandSecurily
Tonal %cera' amid;
See Notes to Schedule of Expenditures
of Federal Awards. 8
Pserthrough Full Aeard Fri
CFonuumher Ideal ying Number Arrant Expenditures
2o205
hall
s 5N,om
s 53509
1630
Hrill
ri
35511
8020
2D60)
Pr -13-17
16551
16551
10571
66202
PRO 15
2wDOD
156536
66202
PRO 14
i W,936
i W,936
261
97641
fUplE61
263521
263521
97612
N/A
613211
613211
97Wy
N/A
6226
6226
3310 0
$ 1707
City of Livonia, Michigan
Reconciliation of Basic Financial Statements Federal Revenue
with Schedule of Expenditures of Federal Awards
Year Ended November 30, 2013
Revenue from federal sources- As reported on financial statements
(includes all funds)
$ 1,819,276
Less other nonfederal reimbursements recorded as grants
(225,097)
Less change in deferred revenue
(38,792)
Add value of noncash assistance
55,456
Revenue earned in excess of expenditures
22,684
Other differences
(1,820)
Federal expenditures per the schedule of expenditures of federal awards $ 1,631,707
City of Livonia, Michigan
Notes to Schedule of Expenditures of Federal Awards
Year Ended November 30, 2013
Note 1 - Basis of Presentation and Significant Accounting Policies
The accompanying schedule of expenditures of federal awards (the "Schedule") includes
the federal grant activity of the City of Livonia, Michigan under programs of the federal
government for the year ended November 30, 2013. Expenditures reported on the
Schedule are reported on the same basis of accounting as the basic financial statements,
although the basis for determining when federal awards are expended is presented in
accordance with the requirements of OMB Circular A-133, Audits of States, Local
Governments, and Non -Profit Organizations. In addition, expenditures reported on the
Schedule are recognized following the cost principles contained in OMB Circular A-87,
wherein certain types of expenditures are not allowable or are limited as to
reimbursement. Therefore, some amounts presented in this Schedule may differ from
amounts presented in, or used in the preparation of, the basic financial statements.
Because the Schedule presents only a selected portion of the operations of the City of
Livonia, Michigan, it is not intended to, and does not, present the financial position,
changes in net position, or cash flows, if applicable, of the City of Livonia, Michigan.
Pass-through entity identifying numbers are presented where available.
Note 2 - Noncash Assistance
The value of the noncash assistance received was determined in accordance with the
provisions of OMB Circular A-133.
Summary of Noncash Assistance - The grantee received the following noncash
assistance during the year ended November 30, 2013 that is included in the schedule of
expenditures of federal awards:
CFDA
Federal Program Number Description Amount
U.S. Department of
Agriculture - Passed
through Wayne
Metropolitan Community
Services Agency 10.569 USDA Food Distribution $ 55,456
10
City of Livonia, Michigan
Notes to Schedule of Expenditures of Federal Awards
Year Ended November 30, 2013
Note 3 - Subrecipient Awards
Of the federal expenditures presented in the Schedule, federal awards were provided to
subrecipients as follows:
Amount
CFDA Provided to
Federal Program Title Number Subrecipients
Community Development Block Grant 14.218 f 14,655
City of Livonia, Michigan
Schedule of Findings and Questioned Costs
Year Ended November 30, 2013
Section I - Summary of Auditor's Results
Name of Federal Program or Cluster
Financial Statements
CDBG Entitlement Grants Cluster.
Type ofauditors report issued: Unmodified
Community Development Block Grant
Internal control over financial reporting:
Neighborhood Stabilization Program -1
• Material weakness(es) identified? X Yes
No
• Significant deficiency(ies) identified that are
Assistance to Firefighters
not considered to be material weaknesses? Yes
X None reported
Noncompliance material to financial
statements noted? Yes
X No
Federal Awards
Internal control over major programs
• Material weakness(es) identified? X Yes No
• Significant deficiency(ies) identified that are
not considered to be material weaknesses? Ya X None reported
Type ofauditors report issued on compliance for major programs: Unmodified
Any audit findings disclosed that are required
to be reported in accordance with
Section 510(a) of Circular A-133? X Yes No
Identification of major programs
CFDA Numbers
Name of Federal Program or Cluster
CDBG Entitlement Grants Cluster.
14.218
Community Development Block Grant
14.218
Neighborhood Stabilization Program -1
66.202
River Rouge National Wet Weather Project
97.044
Assistance to Firefighters
Dollar threshold used to distinguish between type A and type B programs: $300,000
Auditee qualified as low-risk auditee? Yes X No
12
City of Livonia, Michigan
Schedule of Findings and Questioned Costs (Continued)
Year Ended November 30, 2013
Section II -Financial Statement Audit Findings
Reference
Number
2013-001 Finding Type- Material weakness
Criteria - Management's goal was to accurately record all adjustments for the
fund level and government -wide statements.
Condition - Journal entries were necessary to adjust various account balances
in order to properly state them as of November 30, 2013.
Context - Three entries were made to various funds to reflect current year
activity. The adjustments affected liabilities, expenses, receivables, and revenue
and included: a correction to the incurred but not reported liability related to
payments made by the City used in the calculation; increase to the receivable
and revenue related to the Economic Vitality Incentive Program portion of
state -shared revenue for a payment that was earned but not recorded at year
end; and a decrease to liabilities and expenditures as a result of a liability that
was recorded twice.
Cause - For certain financial statement accounts, the City did not have a system
in place to ensure that year-end balances agree to detail and are properly
stated.
Effect - As a result of these three transactions not being completely recorded,
several account balances required adjustments as of November 30, 2013. The
financial statements were misstated priortothe auditor proposing the entries.
Recommendation - The City should develop controls to ensure that all
appropriate journal entries are made so that ending balances are correct.
Viexa of Responsible Officials and Planned Corrective Actions - The City
concurs with the recommendation and will put a process in place to address the
issue.
13
City of Livonia, Michigan
Schedule of Findings and Questioned Costs (Continued)
Year Ended November 30, 2013
Section III - Federal Program Audit Findings
Reference
Number
2013-002 Program Name - Assistance to Firefighters Grant Program - CFDA #97.044;
CDBG Entitlement Grants Cluster - Neighborhood Stabilization Program -
CFDA #14.218; River Rouge National Wet Weather Project - CFDA #66.202;
Highway Safety Cluster- CFDA #22.205
Pass-through Entity - CFDA #14.218 - Michigan State Housing Development
Authority; CFDA #66.202 - Wayne County, CFDA #22.205 - Michigan Office
of Highway Safety
Finding Type - Material weakness
Criteria - A complete and accurate schedule of expenditures of federal awards
(SEFA) is necessary to record all program expenditures as required by OMB
Circular A-133.
Condition - Management's goal is to prepare a complete and accurate SEFA to
record all program expenditures in order to comply with the above criteria.
Questioned Costs - None
Context - The original SEFA provided by the City of Livonia, Michigan as part
of the audit did not include the correct amount of expenditures related to the
Assistance to Firefighters Grant Program, the Neighborhood Stabilization
Program, the River Rouge Wet Weather Program, and the Highway Safety
Cluster.
Cause and Effect - The City did not have appropriate procedures in place to
ensure the completeness of the SEFA. As a result, the SEFA required changes
during the course ofthe audit in order to ensure amounts on the SEFA reflected
the appropriate activity per the City's general ledger. The incorrect amounts
noted on the original SEFA did not impact major program determination.
Recommendation - We recommend that the City implement an additional
level of review to ensure the completeness ofthe SEFA.
Views of Responsible Officials and Planned Corrective Actions- The City
concurs with the recommendation and will add another review prior to
completing the SEFA.
14